Does this sound like a nightmare or what?!?! Imagine you buy a new house and your title agent, or attorney, explains that the only lien against your property will be the expected mortgage. Then a few months later you start to hear rumors in your neighborhood about the builder who didn't pay his contractors, so YOU will be forced to pay because suddenly there is a contractor's lien on your property. This is not a nightmare to some people - it's reality.

Here's a quote from an Elk Grove, CA article titled, "Lien Times Hit Elk Grove": "The unfortunate nature of it here is that the homeowners are on the hook for this because we didn't get paid," said North Hollywood attorney Ken Grossbart, who is representing the landscaper plaintiff, Pacific Parks.

And a quote from a Gainesville, FL article titled, "Builder Woes Hit Home": "...in at least two cases in Weschester, liens have been filed on houses that have already been purchased and moved into. In those cases, according to Florida's Construction Lien Law, if the liens don't get paid the home could be sold against the owner's will to pay for the labor, materials or other services the contractor didn't pay."

In my opinion, every state that upholds this should change their laws. This is a complete injustice! The debt is the responsibility of builder in these cases and if they go bankrupt, then these debts should be included. I'm sure the contractors are feeling ripped off, but they have no right to chase a complete stranger to the transaction. This makes me furious. Tell me I'm not the only one!

 
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9 Comments on Is This Complete INJUSTICE?!

APR
28
2008
This does seem pretty ridiculous. I would think the title insurance company would provide a buffer here. I guess caveat emptor applies.
8:49pm • #1
170,023 Points

In MA, I believe that once the property is conveyed, liens can only be filed on the current owner.  The contractor can file on other property the builder owns, but not on what he has sold.  I amnot an atorney, but have dealt with many builders and their subs.

 

8:51pm • #2
3 Featured Posts Localism Sponsor
Unfortunately, that's how the law works almost everywhere.   I think the key here is educate consumers about the benefits of a Realtor, then show them some better title policy options.
8:51pm • #3
131,334 Points 14 Featured Posts Outside Blog
I know in our state of NH the seller has to sign a document stating they have no unpaid bills. This is ridiculous. i would think title insurance would  kick in.  But,  I am not an attorney.
8:55pm • #5
451,400 Points Outside Blog
yup...mechanics liens...most builders have to sign affadavits that they have paid them..and they should also have a bond...that could be used to pay these...
9:09pm • #6
Thanks for the info on this. I have lived in Florida all of my life and invest in properties here. I have never heard of anything like this up until now. As an investor, I know to do due diligence when it comes to purchasing properties to make sure their are no liens against it. However, I did not know that a lien could be placed on a property after another owner had already paid and taken possession of it. It seems that if there is a law that makes that legal, then the new owner should have some legal recourse against the seller. And I agree with the above statements, I would be pounding on the door of my title insurance company if such a thing ever happened to me.
9:18pm • #7
1 Featured Post

Title insurance should cover this, right???

 

9:23pm • #8
I'm anxious to see a post here responding to the coverage of title insurance. I, like most real estate professionals, assume that title insurance would cover the buyer in this situation.  Can anyone answer this question? 
9:30pm • #9

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Jeremy Butts - Investor

Gainesville, FL

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