How to protect against potential mechanic's lien after closing?

[Tim Silvers]

Purchasing a fix and flip from a seller that had prior issues with GC and is concerned that GC may file a mechanic's lien on the property even after the property is sold to me. The repair work was for an insurance claim. GC is incompetent, has failed to get proper permits and has stalled on the balance of the work so seller just wants out.

Escrow doesn't close until the 24th. GC has 90 days (per Nevada law) from when the work was claimed to have been done file the lien.

Unfortunately, I don't have the luxury of waiting out the 90 days since the seller needs the cash soon and I need the deal. Of course, if the lien is filed after we get a prelim but prior to close, we'll pick it up on the date down which would delay the close, but not leave me stuck. Seller can substantiate that he paid the contractor far in excess of the work done, but I want to be preemptive on this if I can, despite the fact we can show the invalidity of any mechanic's lien from this GC were it to be filed.

This post says I can use a bond or surety which sets money aside to account for the lien amount and then get the lien off the title. The contractor does not necessarily get the money, but has to pursue it, and it still allows me to sell the property.

Any further advice/thoughts greatly appreciated.

[Bruce Lynn]

Not sure there is a lot you can do on your end...but here are some ideas.

1. Ask the title company if they have the seller sign off that there are no outstanding liens.

2. Ask the seller to get the GC and trades to sign off on "paid in full" or completion waivers prior to closing.

3. Have the seller and title company file notices of completion at closing.

4.  See if you can get a list of trades/suppliers seller used, for your records and contact them.  Ask if they have been paid in full?

If I remember correctly the liens are only good for a year or two, so even if they file, if you're holding the property for a while, maybe not a huge deal.  Ask your real estate attorney about that.

Good luck.