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22 Aug 2019

Don't Let a Construction Lien Ruin Your Real Estate Dreams. Here Are Your Options. Featured

The Pattersons hired “Joe Inc.”, a general contractor, to renovate their ground floor bathroom, kitchen, and front entranceway. As the project progressed, the Pattersons noticed a number of defects in the general contractor’s work. However, when they complained, nothing was done to resolve the problems.

The Pattersons refused to pay any further fees until the deficiencies were corrected, the situation was never resolved, and, ultimately, the homeowners and Joe Inc. chose to part ways. Without the Patterson’s knowledge, Joe Inc. registered a construction lien on the property, and the homeowners eventually received a letter from the contractor demanding repayment, though construction remained incomplete.

If you are a homeowner, it’s important to understand the basic elements of what is known as a “construction lien” before you end up in a situation like the Pattersons. As explained in our article from October 2018, a lien is a notice that is registered on title to your property that tells the world that you owe someone money. In the context of residential home construction projects, a lien usually comes into play when it is alleged that a property owner owes money to a general contractor and their subcontractors and materials suppliers. The problem with a lien is that it may be difficult to refinance or sell the property as, generally speaking, banks and buyers want to deal with properties that have no issues registered on title.

What’s worse, unlike average liens, construction liens can be registered on title without getting a court order from a judge. This article explores what you can do if you ever find yourself dealing with a construction lien.

First Steps

If you are facing a construction lien, your first step should be to look at when you signed the contract with the contractor. Was it before or after July 1, 2018? If it was before, the old construction law applies, and the lien should have been registered 45 days after the last date that the contractor worked or supplied materials to the property. The lawsuit should be filed in court 45 days after registering the lien on title. If the contract was signed after July 1, 2018, the new act applies, and there are 60 days to register the lien and 90 days to start the lawsuit. In either case, hopefully, the contractor made a mistake in this timeline and as a homeowner you can explain this to the contractor to get the lien removed so that you don’t need to go to court.

Also, you should try to minimize your damages by hiring another contractor.


What Else Should You Consider?

If all timelines have been met, it is important to keep in mind that contractors and companies that have supplied materials for the project have two years to ask the court to schedule a trial. If two years have passed since this has been done, then the homeowners may ask the court to dismiss the lawsuit and obtain an order to remove the lien. Note that a real estate lawyer would need to complete the paperwork in order to have the lien removed.

Conclusion

The timeline for establishing a lien claim is short and unforgiving. If a lien interest is not validly created within the required timeframe, property owners gain the upperhand in combating a lien they believe to be unfair. However, construction laws are highly technical. So, if this situation arises, you should seek the advice of a qualified lawyer to ensure the best results.

 

Read 216 times Last modified on Thursday, 22 August 2019 16:21
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