But we also realized that if he begins construction and does not pay the contractors doing the work and then goes bankrupt/backs out of the deal somehow, there could potentially end up being a large lien against the house that we still own.

The city was bankrupt and the Mayor was going to jail for corruption. 

After dragging their feet for 3 months past the set close date,  my lone commercial tenant went bankrupt and vacated their lease. 

The whole country is going bankrupt.  

IL is pretty well bankrupt with unfunded public pensions which will come into effect at some point. 

You are right; if he goes bankrupt it would be a huge concern.I always keep security deposit separate; I am not sure of what the law require here in VA.Thanks

I've identified the original owner to be a man who went bankrupt, leaving ownership to his lender.

@Alex LienPeople who bought in 05-07, most are bankrupt, some lost a significant fortune.Some became homeless.I bought an REO in Redwood City, ca, in 2010.

Hotels, restaurants, and car rental agencies have gone bankrupt; closing their doors indefinitely.

You could have national investment grade tenant but they set up subsidiary with one location or just a few and can bankrupt and walk away from the lease.If you do not have experience with this you REALLY need a commercial broker or at least a commercial attorney with industrial experience.