Sold a House w/ Mechanic's Lien

[Eric Tomlinson]

So I obviously hired the wrong GC on a flip.

I learned a lot from a bad experience but the saga still goes on. I had the cabinet guy come by one day when I was there and said he wanted to be paid. I didn't know him or hire him so I called GC. GC came over and had a verbal fight w/ him telling him he had been paid. The cabinet guy agreed he was paid partially in cash (you know you hired the wrong guy when he deals in cash!). The GC paid him some in cash and most by check.

Cabinet man said that what the GC paid him for my job he applied to past balances from other jobs he did for the GC. I tell the cabinet man that's not my fault, he lien's the house and won't negotiate except for full price.

I then tell the title co what has happened and they say they will insure around the lien if I escrow 150% of the amount on the lien.

Has anyone heard of this or had it happen to them? What will be the next step? I talked to an atty and he said it would prob be 2000 bucks for him to sue the cabinet man for a release! The title co says that cabinet man has 2 yrs, I think, to sue for the money.

Moral of this saga is to get lien releases not only from GC, which I did, but from any subs that do work on the house!

Any insight?

Eric

[J Scott]

Yup, this has been discussed here before...

If you're going to use a GC, you want to:

1. Have some trust that the GC is reputable, pays his contractors on time, etc. If you know nothing about a particular GC, either don't hire him or insist on paying his contractors directly;

2. Use lien waivers if you are very concerned about subs not getting paid. Don't release funds to the GC until he provides you signed lien waivers from the subs;

3. Talk to the subs often and hesitate to ask flat-out questions like, "Are you getting paid on time?"

As for escrowing the lien money, this is pretty standard. With the money escrowed, it can now go to court and a judge can decide who gets it. If you win, the money comes back to you; if the contractor wins, he is paid from escrow.

Because the money is guaranteed to be available should the contractor win the court case, there was no reason that the title company needed to hold up the sale of the property, though I imagine the new buyers were informed that there was a lien on their property still.