Live in manager/maintenance threatening lien to prevent sale

16 Replies

Looking for some advice. I'm about two weeks away from closing on a 6-Plex and the seller just notified me that his live in manager/maintenance guy threatened to put a construction lien on the property. They have no written contract and he inherited the guy from the previous owner. The verbal agreement they had was the manager gets free rent for managing/maintaining the property including repairs, etc. I believe by trade he is a carpenter. Owner pays for all materials and manager provides labor.

My intention is to replace the manager with a paying tenant and manage the property myself. When the manager heard he was going to be evicted by me with a 30 day notice to quit he started threatening that he would put a construction lien to block the sale and also claiming he had a 6 month notice clause before he could be evicted.

As the buyer, should I delay closing until the seller clears this up, or will the legal issues stay with the seller and I won’t have to worry about it after sale.

Has anyone dealt with a situation like this (either as the seller or buyer)? What advice do you have?

@Jason Bilbrey

You may want to talk to an attorney about this.  I'm not one.

I'd figure out what leverage you have before you buy, to force any agreements out in the open. I don't know how your courts treat verbal agreements but most treat them as tenuous at best. Of course anyone can say something was agreed to. However, this should all be part of the disclosure process.

Good luck.  

I would start by reviewing the tenants lease to see exactly what the terms are that you will have to assume for his management services and if in fact you would he required to grant him 6 months before terminating his rental agreement.

Also, in the event you own the property and if in fact the tenant does successfully put a lien on the property during your ownership, you would need to have a court order to remove it. 

If you are interested in moving forward with this deal, maybe seek legal counsel on how you can protect yourself now, to better prepare for the future. 

I will add: everything is fixable, but it comes with a cost. If it’s worth the headache, move forward.  

To your success!

Well, I never would have given him notice prior to the sale.  In most states, he wouldn’t have have lien rights, his “payment” was the free rent.  Many actual contractors, this guy is not, threaten the “lien your property” like it’s some big club they have....it’s usually all empty threats and it is not hard to get am illegitimate lien removed. You want to see his contract/agreement though.

If he does actually file a lien prior to closing though, I wouldn't have any issue closing with it as an exception to the title policy. That may cause a problem with your lender though, but in most states the owner can place a cash bond, usually 125% or so of the lien amount, to remove the lien from the property until the issue is resolved.....hence the "I'll lien your property and stop the sale" threat impotent.

BTW, I am a contractor and have filed multiple liens on property, legitimate ones, and have also squashed illegitimate liens filed by yahoo subs.

I agree with those who suspect that the maintenance person is probably making threats that may go no further.  However, do prepare to defend your purchase.   If it is true that there is no written agreement (most owner's won't remember everything he's written), then you may create a sufficient defense by simply getting a short written and notarized statement from the current owner stating, "

"There is no written lease and no written management agreement. Everything is verbal and the owner says that he made no such promises in writing or verbal."


He more than likely won't follow through with it. It would take effort to file the lien and if he isn't even willing to put in effort to save money and buy a place when he is living rent free, it will be too much effort for him. Ask the seller to evict him before you close. If that isn't possible, ask the seller for a credit for the cost of legally evicting him along with how much will be lost in rent if it is a state that eviction takes a while. If neither of those is an option, make sure the deal is still worth it with the eviction calculated in and move forward. 

We inherited one that had been 'liv'n free' for 24 years in a barely habitable attic apt. Once we became familiar with the idiosyncrasies of such a large property it was time for him to go & being M2M we gave him the proverbial 30 day notice. He threw a fit, threatened us with legal action & demanded acreage as it has some land & all his pets were buried on the property. We changed the locks to all the mechanical rooms etc & he went with a 'whimper not a bang'...& the new guy is great.

Originally posted by @Jason Bilbrey :

Looking for some advice. I’m about two weeks away from closing on a 6-Plex and the seller just notified me that his live in manager/maintenance guy threatened to put a construction lien on the property. They have no written contract and he inherited the guy from the previous owner. The verbal agreement they had was the manager gets free rent for managing/maintaining the property including repairs, etc. I believe by trade he is a carpenter. Owner pays for all materials and manager provides labor.

My intention is to replace the manager with a paying tenant and manage the property myself. When the manager heard he was going to be evicted by me with a 30 day notice to quit he started threatening that he would put a construction lien to block the sale and also claiming he had a 6 month notice clause before he could be evicted.

As the buyer, should I delay closing until the seller clears this up, or will the legal issues stay with the seller and I won’t have to worry about it after sale.

Has anyone dealt with a situation like this (either as the seller or buyer)? What advice do you have?

 Hmm...not a lawyer here...however,

WI observes verbal contracts so, this could be potentially messy. Liens follow the property, not the person, because the work was done to and for the property, not the person.

Considering the contracts are verbal, and who knows what the heck that could end up meaning (as far as what was done and who owes who what), I would insist the seller clear it all up prior to purchase, which in this case, again considering the dumb-*** arrangement the seller made with the tenant/manager/contractor, would be the tenant/manager/contractor needs to sign a lien waiver. If it was a written arrangement, you could weigh the costs of the claim against the merits of the deal, but seeing as it's verbal, you're in the dark.

I would NOT take the sellers word for anything - they're not even smart enough to have a written contract and entered into a verbal one. 

Stupid question, but how could he put a lien on the place if he's not owed anything?  If you are that worried and can't get him out before it closes, get him to sign a contract for 6 months at which point he's out.

@Jason Bilbrey  IF the deal is that great and worth pursuing despite all this trouble, get a statement from the owner detailing the situation - what work was done and when, for what amounts, how and who was paid. Maybe the live-in manager has a valid request - if he done extensive repairs to the property for which he was supposed to get N months of free-rent equivalent and still has M rents remaining, then of course he is upset and not "collaborating".

Get the same statement from the live-in manager and see how it reconciles with the one from the seller. Tell him you want to make things right and ensure he is getting paid what's rightfully his (maybe he did repair all the carpentry around the building right before the seller put the property for sell). That way you'll get an idea on what you are dealing with - maybe it's a small amount, maybe it's a substantial amount - and you'll decide on a course of action based on that. Maybe he already got paid in "rent", or maybe he has a small amount left - explain to him you are not operating the same as the seller, pay him the small amount while securing a lien waiver (a document stating he got paid for all the work done at the property and there is no unpaid work - you can use this document to remove liens if he later files one) and don't give him any more more work. Or make all this a condition of the purchase and have the owner secure all these documents. Don't trust the word of either one, double check what the seller tells you in the entire deal.

Once you are clear on who owes what to whom, you can settle things in writing. Complete the purchase and then you can give notice or evict the not paying tenants, with the proper notice. But I would be more worried why the property needed or needs so much maintenance that you need months of rent equivalent as maintenance expense. There is more to this story than you get from both.

(This property is located in Wisconsin)

The owner and the manager/tenant seem to have reached a potential deal where the manager is asking for $2100 and the manager will sign a lien waiver. The owner/seller however is asking me to pay for part of that ($1100) or he(owner/seller) will cancel the sale.

I don't think the seller can just back out of the sale without breaching our sales agreement. At which point I could probably go after him for all my expenses incurred for inspections, appraisals, non-refundable bank fees, etc not to mention my time spent on this deal.

I have a couple of options:

1) Agreed to pay the seller some amount just to get the deal done
2) Don't agree and go to the closing and see if the manager actually puts a construction lien on the property before closing in two weeks
3) Seller backs out of the deal at which point I'm out $2500-$4000 in expenses that I could probably then take him to court for to get back

Option 1: Is easier and gets the deal done, but just seems wrong since it's all on the seller
Option 2: What risks do I face? Is it possible that the manager puts a lien on the property POST sale and now all the liability is my problem and the seller gets off easy?
Option 3: Suing for damages is never fun but I'd win eventually...

Looking for advice, especially regarding my risks around Option 2...

Option 1 is the best IMO if you want to proceed with the acquisition. Agree and get it done.

Option 2 is like you said - tenant puts the lien on the property, before or after, or the moment he hears you are looking to evict him, and you are back to square one.

Option 3 leaves you without the property, risking in courts 2500-4000 in expenses, time and effort that will be definitely more than 1100 of option 1.

I'd negotiate with the seller. Why should you have to pay more than half the money to get the manager to leave? Offer him $500 as he's the one that owe the manager money and get everything in writing as to when the manager will be moved out. I'd withhold your portion until he moves out and you inspect the place.

The reality is , there is a 99% chance the Manager will not Go through the proper steps to attach the lien. The further reality is if he is of the 1%, it would cost A lot more than $1100 in time, money and aggravation to get it removed 

I would first try to negotiate the $1100 down some with the seller and then pay and move forward 

So what if the contractor filed a “notice of intent to file lien” but then never actually filed the lien? How do I clear the notice of intent to file lien so that my property is free and clear?

Originally posted by @Jason Bilbrey :

So what if the contractor filed a “notice of intent to file lien” but then never actually filed the lien? How do I clear the notice of intent to file lien so that my property is free and clear?

Read your state statutes or talk to a construction lien attorney.  BTW, in almost all states it has be someone who is contracted to “perform improvements” to the property to be able to file a lien....not someone under some service agreement for management of the property.