A neighborhood is facing millions of dollars of mechanics liens on all its properties after the development company walked away with the houses unfinished and the contractors not fully paid. [News10]
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On Christmas Eve? Against an innocent party?
Un-freaking-believable. Shouldn't these assholes be suing the builder, the actual guilty party?
@Hanke: I'm not sure that title insurance would kick in unless the liens were in force at the time of closing.
Hopefully someone in the food chain (contractor, builder, developer) had a surety bond with sufficient coverage to pay off the subs and get the liens released.
@buran
Well, the builder is in bankruptcy, so they aren't going to get money from them. And the whole point of a mechanic's lien is that it gives contractors someone to go after if the builder or general contractor doesn't pay. The idea is that the homeowners are getting the benefit of the work they did, so they should be the ones to cough up.
@madanthony: Except, they paid their debt as agreed to the contractor that was responsible. Why should they cough up double?
@Hanke: Sounds like the majority of people in the article have no title - they've just paid deposits, not actually purchased the property/dwelling.
@Buran:
Because thats the way the law works. If you ever have any work done on your home be sure to get a lien release from all of the subcontractors before you give your contractor a check. There are also specific laws in many states about how a Mechanics Lien can be placed. In Florida for example, the contractor or sub cannot place a lien unless they have filed a Notice of Commencement with the County Clerk prior to even starting work on your property. Then you, as the property owner get a copy of it and can even dispute it if there is no work being done on your house. Also, only licensed contractors can place a Mechanics Lien in most states. Even when you purchase a brand new home, make sure your sales contract includes a requirement that your builder include a list of all sub contractors and lien releases from those subs. I have even gone so far as to get Partial Lien Releases for progress payments made to contractors before the work is completed.
@beavis88:
I got the opposite impression after reading the article. The two homeowners they quoted had moved into their homes. I'm not sure of the law in CA since it's been a while since I've been licensed there, but I believe that their title insurance should cover this, if they have insurance. California law (used to) also requires notice be given to homeowners before a mechanics lien can be filed. So did they ignore the notices, or were they not properly notified? If it's the latter then the lien is unenforceable.
@finite_elephant: Based on my own experience, the likelihood of the general contractor in this case having a surety bond large enough to cover their liabilities is vanishingly small. But who knows, maybe California is different.
In my home state, general construction surety bonds aren't required at all, so it's up to individual property owners to insist on one. The state does maintain a contractor recovery fund which people can apply to in cases of fraud or non-performance, but it's limited to $75,000 per licensed contractor total. So, if there are multiple large claims against a contractor you're going to be reimbursed a small fraction of your losses.
Based on my own experience, the likelihood of the general contractor in this case having a surety bond large enough to cover their liabilities is vanishingly small. But who knows, maybe California is different.
In my home state, general construction surety bonds aren't required at all, so it's up to individual property owners to insist on one. The state does maintain a contractor recovery fund which people can apply to in cases of fraud or non-performance, but it's limited to $75,000 per licensed contractor total. So, if there are multiple large claims against a contractor you're going to be reimbursed a small fraction of your losses.
This is what title insurance is for. These people need to call their title companies, and have their lawyers handle it. THey already paid for this service. And BTW, the title company is on the hook.