I've got a mechanic's lien, now what?

Question

Hello,

I've bought a property through an intermediary that was running a turn-key property business. The intermediary paid some of the money, some of the property was built, and then they disappear with the rest of the money. They promise they'll pay it, but they run away.

I contacted the construction company to understand what was going on and I offered to pay them out of my rental income until we managed to extract the money from the intermediary. They stopped responding to my messages. I understand it wasn't a great deal for them but I was trying to make them whole.

Today, they put a mechanic's lien in my property, just as I'm getting my first tenant in. This is my first time dealing with this. Any ideas what I should expect? What should I do now?

Thank you.

John Thedford · Answer

The only way that will disappear is if it is paid

Jay Hinrichs · Answer

every state is different but it wont preclude you from renting it..  you wont be able to refi or sell it without paying it off and do be careful there can be an interest rate component that can be quite high.. although subs will usually discount if your actually going to pay them in full.

J. Pablo Fernández · Answer

I don't owe them the money, Oceanpointe does (see the whole debacle with Morris Invest). I tried to make a deal with them as soon as this exploded to pay what Oceanpointe owes them out of my revenue, they stopped responding to my calls and emails. Then they put the mechanic's lien. I chased them for two months trying to work something out and they would not take my calls nor respond to my emails. I asked my PA to chase them and she got nowhere either.

The work was not done to my satisfaction. The house was unfinished and I had to pay another contractor to finish it so that I could put it on the market to be rented.

I do feel I really tried to pay them and they just don't seem interested. If they go from the lien to court, then, I'll get my lawyer to re-engage.

Bob B. · Answer

If you owe the money then work out something to get it paid.

Kenneth Garrett · Answer

@J. Pablo Fernández

I had this happen last year.  Our attorney challenged the lien as notice was not provided and other filing documents.  In our area, a mechanics lien is only good for two years and they would need to refile.  You might be able to wait them out if you don’t need to sell or refinance.

If you clearly owe the money and they did the work satisfactory then I would work out a repayment plan.

Good Luck.

Matthew Paul · Answer

@J. Pablo Fernández  it doesnt matter if 2 lawyers say its a weak lien . What can also happen is the contractor goes to court and garnishes your wages and or the rent amount . The contractors lawyer could also force a sale of the property to get paid .  And while all this is happening , you get to pay interest

J. Pablo Fernández · Answer

I ended up talking to two different lawyers and I'd recommend it, because in my case, both found problems with the lien that means they won't be able to stand in court. The lien in the property makes selling it hard, so, I would have to counter-sue them to get it lifted; or I can just wait. Since this is a buy and hold property this is not a problem for me and waiting is the cheapest option.

I wish I've done this earlier because this lien was a heavy weight on my mind for 2 months.

Wendell Godard · Answer

First determine who actually placed the lien. Hopefully it's not just the tip of the iceberg.  It is not likely the general contractor - most likely a subcontractor or supplier who provided labor and/or supplied materials for your property.  The subcontractor/supplier wasn't paid in full and their only recourse is to lien the property.  You have a couple options (please don't constitute this as legal advice).  You can pay the amount owed to the general contractor but issue a joint check to ensure the check is paid to the party who issued the lien.  Secondly, you can pay the party who issued the lien directly.  Thirdly, inspect the lien to ensure it is actually legal.  Their are numerous laws that govern liens - lien rights expire if not placed within certain time lines - check that out too.  Lien laws are different in each state.

I've got a mechanic's lien, now what?

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