Mechanics Lien on home

[booter1]

Hi Piggs-seeking advice on this situation..

Recently had work done on our property to include pool, spa, pergola, concrete patio, etc.
All work completed and contractor paid in full and satisfied with quality of work. I requested and received an Unconditional Waiver and Release from the contractor with the final payment (Dec 2011)

Contractor stopped by today to tell me that he basically is in a “cash crunch” due to slow work and did not pay two of the suppliers on the project- concrete and lumber supplier. Unpaid bill for concrete is around $13,500 and unpaid lumber bill is for $3500.

Obviously, appreciate him telling me but not pleased because he said the two suppliers are going to send me a prelimary notice of lien letter on Monday and will put a lien on the home the following week. I am also in the middle of a refi so that will undoubtedly cause problems when the bank does a title search.

I feel like I tried to do everything right but now am being impacted. I thought once I received a release/waiver from contractor that suppliers could not place lien on the home..

Questions- can suppliers place lien on home?
If so, what good is the Release/Waiver?
Anything else I can/should do at this point?
Thanks in advance for any opinions or suggestions.

[Anonymous]

It was nice of the contractor to come by in person.

Ask him to come by again so that you can serve him papers.

Because you are likely going to have to take him to court.

[booter1]

pri-dk,

Thanks but why do you say that? Since I have a release isn’t this between him and the suppliers?

I am certainly not an attorney but I don’t understand how the supplier can put a lien on my home with a release- shouldn’t they be going after him first?

Mark

[svelte]

Conditional and Unconditional Waiver and Release Forms

General Principles: No lien release is binding unless the claimant executes (signs) and delivers a waiver and release. If signed by the claimant or his or her authorized agent, the signed form is effective to release:
— the owner;
— the construction lender; and
— the surety (in the case of a payment bond).

Be careful: paying your contractor (and/or getting a release from your contractor) does not guarantee that other claimants, like subcontractors and suppliers, are paid. A claimant is a person who, if not paid, can file a lien on your home.

http://www.cslb.ca.gov/consumers/legalissuesforconsumers/mechanicslien/conditionalandunconditionalwaiverreleaseform.asp

[booter1]

Thanks Svelte,
I guess I am still struggling with what is the point of the signed Unconditional Release from the contractor if claimants can still put a lien on my home?

If we do nothing and let the lien sit on the home, since we just moved in a few months ago and don’t plan on moving for several years, what happens then?

I am also trying to figure out what I could have done differently..since all work was completed to our satisfaction I then made the final payment and received the release…should I have done it differently? Contractor had solid references and no prior problems that I could find during the due diligence process.
Thx.

[bearishgurl]

[quote=svelte]Conditional and Unconditional Waiver and Release Forms

General Principles: No lien release is binding unless the claimant executes (signs) and delivers a waiver and release. If signed by the claimant or his or her authorized agent, the signed form is effective to release:
— the owner;
— the construction lender; and
— the surety (in the case of a payment bond).

Be careful: paying your contractor (and/or getting a release from your contractor) does not guarantee that other claimants, like subcontractors and suppliers, are paid. A claimant is a person who, if not paid, can file a lien on your home.

http://www.cslb.ca.gov/consumers/legalissuesforconsumers/mechanicslien/conditionalandunconditionalwaiverreleaseform.asp
[/quote]

Good post for clarification, svelte!

[bearishgurl]

Agree with pri_dk here. My experience has been that concrete (sub)contractors, especially, routinely file and serve “lien letters” on every property address their materials were installed in. The recorder’s office keeps those lien letters in a file but does not record them. They are a precursor to a mechanic’s lien if the gen’l who was contracted to do the work does not pay them.

I too feel you will have to sue your general contractor. Contact a real estate attorney to file a limited civil case (if here in SD County). That is the only way to attack this problem and obtain any kind of result, IMHO. If your gen’l does good work and he wants to be able to continue to work, he will not want your lawsuit on his record if it is clean. In the best scenario, perhaps he will be able to settle up with the subs and pay your legal fees in lieu of answering your suit (to make the case go away).

You can also file a complaint with the Contractor’s State License Board (CSLB) simultaneous to suit. They are somewhat inefficient and move very slowly. In the meantime, pursue your suit.

Your refi will likely have to be put on hold.

booter1, did you check this contractor’s record with the CSLB and also his lawsuit record in SD and surrounding counties PRIOR to contracting with him?

If you need a referral to an aggressive RE attorney to handle this matter, please feel free to PM me.

[booter1]

Thx BG-yes I did check his records and history in Riverside and SD county and came back clean and bonding and licensing looked fine

home is in Riverside County.

[bearishgurl]

[quote=booter1] . . . If we do nothing and let the lien sit on the home, since we just moved in a few months ago and don’t plan on moving for several years, what happens then? . . . should I have done it differently? Contractor had solid references and no prior problems that I could find during the due diligence process.
Thx.[/quote]

If a subcontractor in CA who was not paid wishes to foreclose on a mechanics lien, they must avail themselves of judicial foreclosure. In your case, this means they can file a foreclosure suit against you to get a court order to take title to your property to sell it and recover their unpaid mat’ls plus attorneys fees. Whatever is left upon COE (sale) after they and their attorney is paid will be yours.

Your due diligence should have encompassed the contractor’s record with the CSLB AND their record of lawsuits in EVERY county they do business in.

[bearishgurl]

[quote=booter1]Thx BG-yes I did check his records and history in Riverside and SD county and came back clean and bonding and licensing looked fine

home is in Riverside County.[/quote]

Contact him anyway and tell him you will file suit if he does not pay these subcontractors within 30 days. Better yet, have an attorney write him a letter for you. They will find a way to pay their bills forthwith if they want to continue to get jobs.

[booter1]

Thx BG-sent you pm.

[UCGal]

Did you ever get served preliminary notices from the subs when they started? By certified mail? If not, you are probably free and clear.

The sub has to serve a 20 day notice… if they serve it after work has started (or stopped) it can only look back 20 days total.

Since your work was complete 12/11, and it is now 1/27/12, it’s probably past the look back period.

When we had issues we got several threats of liens. A quick phone call stating that a prelim notice hadn’t been filed or was filed too late was enough to make the subs liens go away.

http://www.cslb.ca.gov/consumers/legalissuesforconsumers/mechanicslien/HowToPreventAMechanicsLien.asp

[bearishgurl]

[quote=UCGal]Did you ever get served preliminary notices from the subs when they started? By certified mail? If not, you are probably free and clear.

The sub has to serve a 20 day notice… if they serve it after work has started (or stopped) it can only look back 20 days total.

Since your work was complete 12/11, and it is now 1/27/12, it’s probably past the look back period.

When we had issues we got several threats of liens. A quick phone call stating that a prelim notice hadn’t been filed or was filed too late was enough to make the subs liens go away.

http://www.cslb.ca.gov/consumers/legalissuesforconsumers/mechanicslien/HowToPreventAMechanicsLien.asp
[/quote]

Very good advice, (albeit “after the fact”) UCGal!

[CA renter]

[quote=UCGal]Did you ever get served preliminary notices from the subs when they started? By certified mail? If not, you are probably free and clear.

The sub has to serve a 20 day notice… if they serve it after work has started (or stopped) it can only look back 20 days total.

Since your work was complete 12/11, and it is now 1/27/12, it’s probably past the look back period.

When we had issues we got several threats of liens. A quick phone call stating that a prelim notice hadn’t been filed or was filed too late was enough to make the subs liens go away.

http://www.cslb.ca.gov/consumers/legalissuesforconsumers/mechanicslien/HowToPreventAMechanicsLien.asp%5B/quote%5D

I learned this from your previous posts, UCGal. Thank you!!!!

We are also doing a ton of work on our house, and because of your posts, I’ve told the general contractor that we will not make a payment for each phase of the work that was done until an unconditional lien release is received from all of the (known) suppliers and subs.

There is probably no way to protect yourself 100%, but this should at least minimize the liability. You can also ask the GC to get a performance bond for the project.

http://en.wikipedia.org/wiki/Performance_bond

This is a subject that really gets me riled up. A home owner should absolutely NOT be liable for issues arising between a GC and his subs or suppliers; they should only be responsible for paying the people they have personally contracted with. I have no idea how this ever became legal (seems like someone got a kickback of sorts, IMHO).

Best of luck to you, booter1! Please let us know how things turn out.

[svelte]

[quote=CA renter]

This is a subject that really gets me riled up. A home owner should absolutely NOT be liable for issues arising between a GC and his subs or suppliers; they should only be responsible for paying the people they have personally contracted with. I have no idea how this ever became legal (seems like someone got a kickback of sorts, IMHO).[/quote]

It gets me riled up too, but to be fair there are slimey homeowners too which probably necessitated the law. Consider a homeowner who conspires with a general contractor to do work way below cost, with the owner and gc knowing full well there would not be enough $$ to pay subs. The homeowner gets a new pool/room/whatever for very cheap, the gc gets his money, only the subs get screwed.

The 20 day notice thing is probably the best compromise (thanks for that info, UCGal!) and probably makes nobody happy, least of all subs and homeowners. Sometimes that the best sign of a good compromise. 🙂

Finally, I’m not sure it would work too well on something like a pool, but I’ve known people who have told the gc to send all shipments and bills directly to the homeowner…all lumber, concrete, etc are then drop-shipped directly to the home, the homeowner writes a check upon delivery, and the issue of nonpayment for materials disappears. It has worked well for the people who have used this method.

[Author]

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