Is a mechanic’s lien a deal killer?

by | Jun 8, 2021 | Real Estate Litigation |

The real estate market is currently hotter in 2021 than it ever was. There are various reasons for this, but one main reason is a lack of housing stock across the country. This lack of homes for sale has meant that some are motivated to take more steps to close a deal than during pre-pandemic times. In fact, they may find themselves wanting to buy a property with a mechanics lien placed on it.

What is it?

A mechanics lien is a legal claim placed on a home or property. These are usually filed by building material suppliers or subcontractors when the property owner does not pay their bill. The reason may be the owner did not have the money, but it is more likely that there was a dispute regarding some condition involving goods and services in their contract. Perhaps the owner even paid the developer or contractor, but they did not pay the person who placed the lien. Whatever the reason, the property cannot be sold without resolving the matter.

Options for resolving it

The owner should typically try to clear the lien on their own, but the buyer may need to help “motivate” them so the transaction can move forward. Typical ways for clearing a lien include:

  • Vacate the lien: This involves fighting the lien in court. It forces the lienor to make their case in court for why they are owed money, which they may not want to do. The owner can also argue at this time that they do not owe money.
  • Negotiate with the entity who placed the lien: The simple solution would be to pay them their money, regardless of whether they “deserve” it. Perhaps an offer for less in cash will motivate the lienor to accept the offer.
  • Get a lien discharge bond: Using a bond to discharge a lien can be complex, but the owner can obtain a surety bond from an insurance company that would cover the amount. The lien is then attached to the bond.

There is a reason for that lien

The buyer who gets involved with any of these actions should have a contract with the seller regarding the outcome, transfer of title, price and other details. This precaution can help eliminate disappointment down the line if the seller tries to renegotiate the deal or void it altogether.