Mechanics lien on Flip property for undone work and no contract

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Mechanics lien on Flip property for undone work and no contract

Christopher Dunson

Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes

I have someone who had no license when doing work for me, and now has a handyman's license organizing and subcontracting work on my flip. Initially, I told him that I may have to wait to pay him $15000 for work done until the house sells. He said that's perfectly fine. I have done 3 projects with this guy, and never had a problem. This is a first. I was able to pay him for everything up until we had about $4500 left. We had a disagreement, when I told him I have to wait till the home sells for the rest, and he left without finishing. He only finished around $2000 of work. Later he told me I owe him $4500, I need to pay him, and he'll finish the work. I told him I want to pay him, but he will have to wait. He put a lien on my property for all of the work including the unstarted and unfinished work plus $3500 for nothing. I cannot sell the home, therefor I cannot pay him.

I have since finished the remaining work with somebody else, and got a leaky roof( which he subcontracted out, and then would not give me the phone number to call, nor did he send the roofer back). There are numerous things I later found besides the roof that are done badly or unfinished, ex: 10 outlets not working, or not grounded, or reversed.

I have an offer on the house to close in 28 days, and am looking for quick solution, and or long term action, as trying to mediate the situation with him face to face seems to be costing me and getting me nowhere. Thank you.

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Christopher Brainard

Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes

Originally posted by @Christopher Dunson:

@Christopher Brainard Luckily, everything is permitted to the best of my knowledge.

If you're located in Las Vegas, I have some bad news for you, there is no such thing as a handyman license in Nevada and unlicensed contractors can't pull permits, so I highly doubt anything is permitted. Your handyman is probably working under a standard business license, which forbids being paid or accepting payment for more than $1000 on any job or for any customer in a given year. If you're holding the property in your personal name and you intend to live there, you can pull permits, but they make you sign a form under penalty of perjury that you don't' sell or rent it for at least a year.

So to answer your questions, you can pay the lien at closing and be done with the situation. Any legal action you take against him will definitely last longer than your escrow, the courts in Clark County aren't super fast. You can call the contractors board, but since you knowingly hired him multiple times, that could be bad for you. You can contact him directly and try to work out some sort of deal to get the lien released prior to close, but if he knows you're going to close he has little incentive to cooperate and it sounds like he knows the game better than you do.

-Christopher

P.S. If you don't have the cash to pay your contractors, you shouldn't buy the house or you should raise funds to cover your shortfall. Its been my experience that most contractors aren't fun to deal with under normal circumstances, but if they even suspect they will get shorted, you're almost guaranteed that they'll stop work immediately and you will face this exact same situation again.

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Christopher Brainard
Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
9y
Originally posted by @Christopher Dunson:

@Mike Cumbie
Thank you mike for lining that up short and sweet.
It sounds to me, like pretty much anybody can pick up a simple license before or after work is done, and put a lien on whatever property they did any work on, and say it was for double the amount pretty much even if they were paid in full if there are not proper docs signed waiving the right to lien each category of work completed. Or am I missing something here?
Yes, you're missing how business is conducted. First, you get bids and verify licenses. Next, you draw up a specific contract covering all points of the work and agree on the payment and draw schedule. Then work is performed. When complete, you do a walk through and sign off on the work. You pay the contractor and he gives you a release and the CoO.
If this guy never worked on the property and filled a lien, that's frivolous and carries jail time. If there is no contract, no license, and no process, nobody really knows who said what and when. He is just as much as fault as you are, but he isn't under the time pressure to sell the house.
-Christopher
1 Reply
Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
Originally posted by @Matt Geerts:

Are you sure that there actually IS a lien? He's not just bluffing?
Yes, title brought it to my attention. But he did not notify me before or after, and I haven't received anything in certified mail, which is an important step in the lien being valid.
0 Reply
Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
Originally posted by @Irina Belkofer:

@Christopher Dunson did you check out if he actually file the lien against the property? If he doesn't have any proof in writing, can he still do it?
If he brought witnesses, do they have to be neutral parties or people who he hired?
I like the idea to get official inspection done (from the City, for example) and present it as a proof that the work was not done or was done incorrectly, or no proof of permits. If there is nothing in writing, it means his word against yours.
There better be a lawyer who knows about this game :(
The lien will be paid at the closing and that's what you don't want to do - because you'll pay twice for the work.
There should be a solution when contractors get greedy and don't finish the work.
Yes, the inspection was done yesterday, and I am awaiting the results, as some problems are still present in the home, and I wanted to get them done after inspection. I have a lot of pictures, and videos of everything that was not finished or done well.
1 Reply
Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
Originally posted by @Christopher Brainard:
Originally posted by @Christopher Dunson:

@Mike Cumbie
Thank you mike for lining that up short and sweet.
It sounds to me, like pretty much anybody can pick up a simple license before or after work is done, and put a lien on whatever property they did any work on, and say it was for double the amount pretty much even if they were paid in full if there are not proper docs signed waiving the right to lien each category of work completed. Or am I missing something here?
Yes, you're missing how business is conducted. First, you get bids and verify licenses. Next, you draw up a specific contract covering all points of the work and agree on the payment and draw schedule. Then work is performed. When complete, you do a walk through and sign off on the work. You pay the contractor and he gives you a release and the CoO.
If this guy never worked on the property and filled a lien, that's frivolous and carries jail time. If there is no contract, no license, and no process, nobody really knows who said what and when. He is just as much as fault as you are, but he isn't under the time pressure to sell the house.
-Christopher
Your input is much appreciated. I have read numerous books and studied numbers of real estate, creative finance, tax, and so on, but never how the contracting business works until the past month or so. I cant count how many things I have to do, nor problems arising daily at the moment, and I over extended myself financially. Many things will be changing when everything gets settled with how I do things, how much I take on at once, and running business with structure and organization. I guess these are those things that you learn on the way when you jump in and learn along the way as opposed to sitting back and possibly never getting started trying to figure out everything before starting.
I quit my job to focus 100% on business instead of 50% on business as well. I never thought it would be needed again.
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Sara Anne Pace
Middletown, CT · Member since 2017 · 18 posts · 16 votes
9y
When a kitchen contractor put a mechanics lien on my property over $1500 after doing shoddy work, I hired a lawyer. He filed a mechanics lien even though I told him I would pay him $500 to part ways. Similar to your situation, this contractor did good work on three prior kitchens but the fourth was different. He was a licensed contractor. My lawyer forced the contractor to get a lawyer to respond to him. I think he sent him a bunch of certified letters. This cost him money and hassel. Then my lawyer told his lawyer that he will take him to court. The contractor did not want to go to court. Then my lawyer made them take the lien off. My lawyer then told him that filing a mechanics liens for no good reason tainted the title of my property and they should pay a penalty for that. To summarize: Contractor paid me $1000 and took the mechanics lien off my property. This process took about 4 months.
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
9y
@Christopher Dunson You need to read and understand your state mechanics lien laws, they are Very specific. Him not being licensed may not prevent him filing a lien, and even if so, it would likely take you a long time to get to court to remove it. Most states have an option to "bond off" the lien either by buying a bond from an insurance co. or placing cash into a particular escrow account (here it is 110% of the lien) which would remove the lien from the property.
For my own reference, I'd run a quick search in the county records to see how many other liens he has filed.
2 Reply
Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
Originally posted by @Sara Anne Pace:

When a kitchen contractor put a mechanics lien on my property over $1500 after doing shoddy work, I hired a lawyer. He filed a mechanics lien even though I told him I would pay him $500 to part ways. Similar to your situation, this contractor did good work on three prior kitchens but the fourth was different. He was a licensed contractor. My lawyer forced the contractor to get a lawyer to respond to him. I think he sent him a bunch of certified letters. This cost him money and hassel. Then my lawyer told his lawyer that he will take him to court. The contractor did not want to go to court. Then my lawyer made them take the lien off. My lawyer then told him that filing a mechanics liens for no good reason tainted the title of my property and they should pay a penalty for that. To summarize: Contractor paid me $1000 and took the mechanics lien off my property. This process took about 4 months.
I appreciate your story and the time period given as it gives me a good idea what I am dealing with, and that in some ways, I have more of an advantage than you did.
0 Reply
Jack B.
Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes
9y
Originally posted by @Account Closed:

@Jack B. You are wrong the lien holder will get 100% of what the lien said.
Ummmm...You clearly didn't read my post. 1) I was the first person in this thread to point out that having a lien doesn't mean you can't sell the house, which has changed the tone of the thread. 2) I said that if you want you can take him to court but you have a 50% chance of winning since you have no contract with this guy....So, no, I was right, you just didn't read it correctly...Somehow you read that as my having said that he will only have to pay the guy 50% when the guy sells....
1 Reply
Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
Originally posted by @Wayne Brooks:

@Christopher Dunson You need to read and understand your state mechanics lien laws, they are Very specific. Him not being licensed may not prevent him filing a lien, and even if so, it would likely take you a long time to get to court to remove it. Most states have an option to "bond off" the lien either by buying a bond from an insurance co. or placing cash into a particular escrow account (here it is 110% of the lien) which would remove the lien from the property.
For my own reference, I'd run a quick search in the county records to see how many other liens he has filed.
Abosolutely, I have been reading them on and off for the past few days, and you are correct, he does not have to have a license to file a lien in Nevada. I have communicated with my agent about speaking with title regarding putting the lien money in escrow, but in two days he has not gotten an answer. Unfortunately, one has to go through many people to find reliable people with a sense of urgency and the same motivation. I know I'll find my team eventually, but for now I'm doing it the worst way, and so far, I have been my team. Which is tough.
**As far as I know he went to the next customer and filed another lien because she said he did bad work on a few things and would not pay him. Could be a good sign for me now that you bring that up.
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Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
Originally posted by @Jack B.:

Originally posted by @Account Closed:
@Jack B. You are wrong the lien holder will get 100% of what the lien said.
Ummmm...You clearly didn't read my post. 1) I was the first person in this thread to point out that having a lien doesn't mean you can't sell the house, which has changed the tone of the thread. 2) I said that if you want you can take him to court but you have a 50% chance of winning since you have no contract with this guy....So, no, I was right, you just didn't read it correctly...Somehow you read that as my having said that he will only have to pay the guy 50% when the guy sells....
I read a few posts from John Anderson yesterday, and it seems in all threads he was misunderstanding things, making assumptions, and negative with no solutions spoken of. Good call Jack.
1 Reply
Glenn Banks
Design | Build · Milwaukee, WI · Member since 2014 · 107 posts · 35 votes
9y
Christopher Dunson The bank may pay him off. Ask to access some equity and deduct from the sale amount. I've been through this situation before as a contractor and it worked. The title company didn't want any secondary legal claims on the title besides the primary mortgage holder in 1st position.
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Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
Originally posted by @Glenn Banks:

Christopher Dunson The bank may pay him off. Ask to access some equity and deduct from the sale amount. I've been through this situation before as a contractor and it worked. The title company didn't want any secondary legal claims on the title besides the primary mortgage holder in 1st position.
Great for a backup plan. Thank you.
0 Reply
Matthew Olszak
Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
9y
@Christopher Dunson One consideration is that if this isn't an established business/person, your recourse could be minimal. IE lets say you fight this for the next year, get a judgement for $100k in damages, but if he/the llc doesn't have $100k in assets, good luck collecting - people can't pay you what they don't have. Much like a tenant w/ cash for keys. We know those tenants don't have the money or income to collect against if they destroy our units, so its cheaper just to pay to get rid of them than to run those legal expenses and risks of further damages.
My advice - this is a small enough amount that its worth it to try to settle and if that doesn't work, pay outright at closing. Then sue pro-se via small claims if you think you can recoup something. I know the idea sucks of having to pay, but try to put your ego/morals/ethics/etc aside and look at the big picture of the $ you'll be making on this sale.
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Alex J.
Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
9y
how long has the lien been on the property? there is a statue of limitations in California i think 6 months. once a mechanic lien was slapped on my property for work that i paid in full, but my contractor didnt pay the supplier so the supplier got cute and tried to jam me up which is absolutely their right. one letter from my lawyer and he removed the lien immediately.
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Jack B.
Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes
9y
Originally posted by @Christopher Dunson:

Originally posted by @Jack B.:
Originally posted by @Account Closed:

@Jack B. You are wrong the lien holder will get 100% of what the lien said.
Ummmm...You clearly didn't read my post. 1) I was the first person in this thread to point out that having a lien doesn't mean you can't sell the house, which has changed the tone of the thread. 2) I said that if you want you can take him to court but you have a 50% chance of winning since you have no contract with this guy....So, no, I was right, you just didn't read it correctly...Somehow you read that as my having said that he will only have to pay the guy 50% when the guy sells....
I read a few posts from John Anderson yesterday, and it seems in all threads he was misunderstanding things, making assumptions, and negative with no solutions spoken of. Good call Jack.
On every forum I post on, when I go through the posting history of anyone I have an issue with, I find a pattern of this type of stuff....You're totally right. Same thing if I have a problem with a business. Go to Yelp and see they are littered with one star reviews with the EXACT same complaints/issues as mine....
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Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
@Mike Cumbie
@Christopher Brainard
I ended up being able to close on the sale of this property by holding the money in an escrow account. 150% of the amount of the lein. I can hold it there for 6 months. The attorney Andrew Pastwick recommended to me by @Account Closed seems to be out of town, but I would like if I could get some other recommendations, so that I might be able to move forward with the process. If anybody has any questions about this, or input please ask as it seems like this is an uncommon but useful way to get the property sold if you feel you have been leined against unjustly. Thank you.
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Christopher Brainard
Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
9y
Originally posted by @Christopher Dunson:

@Mike Cumbie
@Christopher Brainard
I ended up being able to close on the sale of this property by holding the money in an escrow account. 150% of the amount of the lein. I can hold it there for 6 months. The attorney Andrew Pastwick recommended to me by @Account Closed seems to be out of town, but I would like if I could get some other recommendations, so that I might be able to move forward with the process. If anybody has any questions about this, or input please ask as it seems like this is an uncommon but useful way to get the property sold if you feel you have been leined against unjustly. Thank you.
Glad you were able to sell your property. Unfortunately, I don't have and advice for this process, as I haven't experienced it before. Hopefully, you will be able to get a court date within the time frame allowed and be able to resolve the situation.
-Christopher
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Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
9y
@Christopher Brainard
Hi Christopher,
I don't think I made it very clear in the last post, when I requested "other recommendations," what I meant was other RE attorney recommendations that anyone may have some experience with. Thank you.
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Christopher Brainard
Rental Property Investor · Rockwall, TX · Member since 2015 · 891 posts · 701 votes
9y
I sent you some contact info for an attorney that did some contracts for me a couple years ago. I don't know him well enough to recommend him but it may be worth a call.
-Christopher
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Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
8y
Update: I tried to settle with the worker to just remove the lien from the property, but even offering him double what he would have actually been owed , he declined saying, "I would rather pay an attorney all of the money of the total lien than settle with you." So, I went to Andrew Pastwick as recommended by @Account Closed (thank you), and provided him with copies of checks paid as well as estimates provided to me by the worker ( who was not a contractor ) which made our case easier. As I said, if the work was completed (which it was not) he would have only been owed $1500 more or less, but the lien was for $7500, which is illegal. My attorney ended up calling me a week before the hearing, with the news that he had spoken with the worker's attorney, and that the lien will be released in full, with no court. Thank everybody who pitched in for your advice. I hope this will help others in similar situations.
1 Reply
Christopher Dunson
OP
Investor · Las Vegas, NV · Member since 2016 · 128 posts · 32 votes
8y
We also had an official inspection done, which showed problems with the property that he himself directly worked on. That definitely helps.
1 Reply
Andrew K.
Rental Property Investor · Philadelphia, PA · Member since 2016 · 82 posts · 22 votes
8y
Wouldn't this be a case of tortious interference?
0 Reply
Rob D.
Investor · Riverside, CA · Member since 2015 · 280 posts · 111 votes
8y
Originally posted by @Christopher Dunson:
I have someone who had no license when doing work for me, and now has a handyman's license organizing and subcontracting work on my flip. Initially, I told him that I may have to wait to pay him $15000 for work done until the house sells. He said that's perfectly fine. I have done 3 projects with this guy, and never had a problem. This is a first. I was able to pay him for everything up until we had about $4500 left. We had a disagreement, when I told him I have to wait till the home sells for the rest, and he left without finishing. He only finished around $2000 of work. Later he told me I owe him $4500, I need to pay him, and he'll finish the work. I told him I want to pay him, but he will have to wait. He put a lien on my property for all of the work including the unstarted and unfinished work plus $3500 for nothing. I cannot sell the home, therefor I cannot pay him.
I have since finished the remaining work with somebody else, and got a leaky roof( which he subcontracted out, and then would not give me the phone number to call, nor did he send the roofer back). There are numerous things I later found besides the roof that are done badly or unfinished, ex: 10 outlets not working, or not grounded, or reversed.
I have an offer on the house to close in 28 days, and am looking for quick solution, and or long term action, as trying to mediate the situation with him face to face seems to be costing me and getting me nowhere. Thank you.
First of all his leaving the project could be construed as job abandonment. You could go after his bond if he had one, which I doubt he does. Either way personally I would file a complaint against his license with your state contractors board when it’s all said and done.
Ultimately for now to get your house sold
What you can do is tell him you need a conditional release of lien and you can put him on the disbursement of funds from the escrow company. This way he gets his money once the house sells and it’s coming straight from the sale of the house and from the escrow company.
If that’s not happening because the dude seems like a douche, borrow the money BUT make sure that you negotiate the payment in cash AND make sure that you get a UNCONDITIONAL release of lien
Next time make sure that you get someone to oversee your project and the subs.
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