I have a friend who bought a home and within 3 months a mechanics lien was placed on the home due to work completed and not paid for by the rehabber. What is my friend's recourse
I see no one's replied and I'm guessing they don't know the answer either. My only thought would be the guy signed an sellers/owner's affidavit for the title insurance and in there it should state that no repairs or improvements have been done to the property that haven't been paid for. I myself would call my lawyer but the only thing I can think of myself would be to get that affidavit and sue the guy. if he's a rehabber, he should be buying and selling property wtih some regularity.
the other thought would to be sure the contractor followed proper procedure to perfect his lien - a technicality might get your friend off
This is exactly why smart rehabber doesn't pay the Gen Contractor until he/she signs affidavit that there are NO outstanding contractor's debts, all the subs have been paid in full, etc....and why I don't deal with unlicensed, UNBONDED Gen., so his bond co. has to stand behind his affidavit.
[addsig]
The next step should be to contact the seller and try to resolve things peacefully. A call to the contractor/lien holder first might give you more of the story when you are talking to the seller.
If you can't resolve things from there, you will need to contact an attorney and sue the seller in small claims court. If you feel you can prove the case without an attorney, you can certainly do so.
From there you will likely get a judgment but it is your responsibility to collect that. An attorney might be able to advise you on additional steps to collect on judgments (such as garnishing wages). I have never had to sue anyone yet so I don't have experience here.
You should check to see what interest rate mechanics liens accrue at and make sure you sue for that cost plus interest plus damages and costs if you wish.
If you bought title policy, have your lawyer put the title ins. co. on notice that you're demanding they stand behind their policy and clear your title.
This sounds rough and threatening to a layman, but trust me, all title ins. cos. get these letters daily and they handle them as routine matter of course. Their legal dept is very familiar with the process of clearing the titles they've insured.
Wow ... I sincerely hope you and your stepmother have a profound and loving relationship. Money makes the best of people with the best of character suspect ... in my humble opinion. Indeed, with all of that equity she has and legally the house is hers ... regardless of what your father intended; if the wrong person gets in her ear you can have a problem.
There is no stature in our system of juris prudence that allows for the intent of a decendent!
Instead of his wife's name, why didn't he place the property in a trust? He could have willed it to a LLC with you and your wife as board executive ( this in an effort to avoid the inheritance tax) and this problem would not exist.
I would suggest you get your stepmom to set-up this LLC with you and your wife as officer in that corp. Check with your accountant to insure the least liablity concerning your tax strageties.
To echo & emphasize what Stan says, I'd move immediately to get this into your name, or into some entity, such as a new Trust that you control...before that wrong influence does catch your step-mom off guard and this property slips away from you.
Thanks for the info about a LLC but is a quit deed an option? And what is my legal recourse in the event she gets greedy. The mortgage has been debited from my checking accounr for the last 12 years and all the expenses and repairs associated with the house were paid by me.
Transferring the title when will trigger a DOS condition. This does not mean the lender will force the loan to be paid off but they legally could.
You could do a lot of things to move the house to your name. It is up to what you step mother and your side work out. Even a quit claim will work but it sometimes is not considered strong enough if there is a later dispute.
Rather then looking for the cheapest route, consider the costs of doing it right what you need to pay given the past. You are getting a gift. Figure out a good way to take the gift so that every one is whole and the documents are clean.
Unless your credit is just completely lousy, there is a very simple solution here.
Have your stepmom deed you the property via a warranty deed. My suggestion is to have an attorney or title company (whichever is your state's norm) do the title and deed work so there are no problems.
Call around to some mortgage brokers that specialize in bad credit refinances. Mention that the loan will need to be no seasoning as well. If your figures are correct, getting a refinance loan on this should not be a problem since the refinance amount will be less than 50% LTV. If you have kept records of your last 12 years of payments, most lenders will count that as part of your payment history.
I'd suggest pulling some extra out and giving to your stepmom for all her help.
Forgot to mention that seller & I used lisitng agent for purchase (dual agency I believe?) so the agent has been acting as a negotiator thru the whole process. [ Edited by giovannitp on Date 09/12/2004 ]
If the RE Agent was acting as dual agent, for you and seller, he/she's got some big time responsibility here, and she should have made sure, or made sure you made sure, that the legal notice WAS given to tenant as stated.
Her RE broker should immediately be notified about her failure to do so, as any liability on agent's part is liability against the broker, which that broker isn't going to like at all.
I would have expected the $1,200 to be the max as that is more or less what has been agreed.
Understand that when you completed the deal you became the landlord. So, if I understand you correct, the seller is no longer in the loop and you are the one who has to move the tenant out. If they fail to move you are the one who will have to evict. If the paperwork is not in order you are the one who will be told that they can stay.
So, you are the landlord from the courts point of view and you better make sure you are handling the process correctly. Tenants have rights and just because you are new to the scene scores you nothing with a judge.
The purchase has closed - the money left in escrow is the seller's & won't be released until I give approval. To the best of my knowledge my agent is the co-broker for her agency. I suppose this is why she has already volunteered to assist tenant in finding another rental to move to. The seller has some other rental houses but I don't think the tenant was eager to consider moving to them since they're far away from this house.
I always looked at the seller for being ultimately responsible for vacate notice, but you make a good point JohnMerchant.
I see no one's replied and I'm guessing they don't know the answer either. My only thought would be the guy signed an sellers/owner's affidavit for the title insurance and in there it should state that no repairs or improvements have been done to the property that haven't been paid for. I myself would call my lawyer but the only thing I can think of myself would be to get that affidavit and sue the guy. if he's a rehabber, he should be buying and selling property wtih some regularity.
the other thought would to be sure the contractor followed proper procedure to perfect his lien - a technicality might get your friend off
thanks for the reply, I almost gave up
[addsig]
You might check with the title company that closed the deal and issued title insurance. They may be liable.
Sometimes this is as simple as bringing it to the attention of the seller.
How big is the lein? Mechanics leins not paid and not acted upon by the mechanic expire after two years in Illinois.
Was there some dispute between the rehabber and the mechanic that is the cause of this bill not being paid?
the rehabber made the repairs and sold the house soon after and before the contractor was fully pd.
This is exactly why smart rehabber doesn't pay the Gen Contractor until he/she signs affidavit that there are NO outstanding contractor's debts, all the subs have been paid in full, etc....and why I don't deal with unlicensed, UNBONDED Gen., so his bond co. has to stand behind his affidavit.
[addsig]
thanks for the info johnmerchant, but what next step should be taken by the new home owner?
[addsig]
The next step should be to contact the seller and try to resolve things peacefully. A call to the contractor/lien holder first might give you more of the story when you are talking to the seller.
If you can't resolve things from there, you will need to contact an attorney and sue the seller in small claims court. If you feel you can prove the case without an attorney, you can certainly do so.
From there you will likely get a judgment but it is your responsibility to collect that. An attorney might be able to advise you on additional steps to collect on judgments (such as garnishing wages). I have never had to sue anyone yet so I don't have experience here.
You should check to see what interest rate mechanics liens accrue at and make sure you sue for that cost plus interest plus damages and costs if you wish.
GOOD LUCK
thanks again for all the help
[addsig]
Patrecejames,
Here's a link to a short article from a legal source about mechanic's liens in California. It should give you some of the specifics you're after.
http://tinyurl.com/6sks2
If you bought title policy, have your lawyer put the title ins. co. on notice that you're demanding they stand behind their policy and clear your title.
This sounds rough and threatening to a layman, but trust me, all title ins. cos. get these letters daily and they handle them as routine matter of course. Their legal dept is very familiar with the process of clearing the titles they've insured.
Thanks for all the info guys, you have been a tremendous help and thanks to "wannabe21" that link was very helpful.
[addsig]
Wow ... I sincerely hope you and your stepmother have a profound and loving relationship. Money makes the best of people with the best of character suspect ... in my humble opinion. Indeed, with all of that equity she has and legally the house is hers ... regardless of what your father intended; if the wrong person gets in her ear you can have a problem.
There is no stature in our system of juris prudence that allows for the intent of a decendent!
Instead of his wife's name, why didn't he place the property in a trust? He could have willed it to a LLC with you and your wife as board executive ( this in an effort to avoid the inheritance tax) and this problem would not exist.
I would suggest you get your stepmom to set-up this LLC with you and your wife as officer in that corp. Check with your accountant to insure the least liablity concerning your tax strageties.
To echo & emphasize what Stan says, I'd move immediately to get this into your name, or into some entity, such as a new Trust that you control...before that wrong influence does catch your step-mom off guard and this property slips away from you.
Thanks for the info about a LLC but is a quit deed an option? And what is my legal recourse in the event she gets greedy. The mortgage has been debited from my checking accounr for the last 12 years and all the expenses and repairs associated with the house were paid by me.
Just have your step mom sign a warranty deed (preferable over a quit claim) to you and then you now own the property. It is simple as that.
You can continue making the payments as you always have, and when your credit is better you can choose to refi if you wish.
GOOD LUCK
If things get ugly ... your attorney might have a claim of adverse possession.
Best of Luck!
Transferring the title when will trigger a DOS condition. This does not mean the lender will force the loan to be paid off but they legally could.
You could do a lot of things to move the house to your name. It is up to what you step mother and your side work out. Even a quit claim will work but it sometimes is not considered strong enough if there is a later dispute.
Rather then looking for the cheapest route, consider the costs of doing it right what you need to pay given the past. You are getting a gift. Figure out a good way to take the gift so that every one is whole and the documents are clean.
John
[addsig]
"Transferring the title when will trigger a DOS condition. This does not mean the lender will force the loan to be paid off but they legally could."
John Locke has done hundreds of "sub-to" deals, and not one, he says, has ever been called by the lender.
They could have, and can, in this situation, but if your payments stay current, not likely to happen is the moral of the story.
Unless your credit is just completely lousy, there is a very simple solution here.
Have your stepmom deed you the property via a warranty deed. My suggestion is to have an attorney or title company (whichever is your state's norm) do the title and deed work so there are no problems.
Call around to some mortgage brokers that specialize in bad credit refinances. Mention that the loan will need to be no seasoning as well. If your figures are correct, getting a refinance loan on this should not be a problem since the refinance amount will be less than 50% LTV. If you have kept records of your last 12 years of payments, most lenders will count that as part of your payment history.
I'd suggest pulling some extra out and giving to your stepmom for all her help.
Roger
Forgot to mention that seller & I used lisitng agent for purchase (dual agency I believe?) so the agent has been acting as a negotiator thru the whole process. [ Edited by giovannitp on Date 09/12/2004 ]
"Before you dock the escrow"...what's this mean?
Have you closed and paid all BUT the $1200?
If the RE Agent was acting as dual agent, for you and seller, he/she's got some big time responsibility here, and she should have made sure, or made sure you made sure, that the legal notice WAS given to tenant as stated.
Her RE broker should immediately be notified about her failure to do so, as any liability on agent's part is liability against the broker, which that broker isn't going to like at all.
I would have expected the $1,200 to be the max as that is more or less what has been agreed.
Understand that when you completed the deal you became the landlord. So, if I understand you correct, the seller is no longer in the loop and you are the one who has to move the tenant out. If they fail to move you are the one who will have to evict. If the paperwork is not in order you are the one who will be told that they can stay.
So, you are the landlord from the courts point of view and you better make sure you are handling the process correctly. Tenants have rights and just because you are new to the scene scores you nothing with a judge.
John
[addsig]
The purchase has closed - the money left in escrow is the seller's & won't be released until I give approval. To the best of my knowledge my agent is the co-broker for her agency. I suppose this is why she has already volunteered to assist tenant in finding another rental to move to. The seller has some other rental houses but I don't think the tenant was eager to consider moving to them since they're far away from this house.
I always looked at the seller for being ultimately responsible for vacate notice, but you make a good point JohnMerchant.