Whether to Remove a Lein

      A cabinetmaker who has not been paid asks whether he should remove his lein against the house, as requested by the owner. Colleagues explain why he should not. February 6, 2010

Question
Last year I did a kitchen for a builder. Delivered, installed complete but never got my final check, $3800. Shame on me for delivering without it, but he was a friend. Two months later I'm still not paid. I mechanics lien the homeowner, but only send a copy to my builder friend hoping to settle without incident. I get no response. I contact the homeowner and go over all the details and finally send them the lien papers.

The plan was this: the builder's work was not completed in other parts of the house, so there was still money owed that they could hold back on my behalf, then pay me direct.

Today, a year later, I get a phone call from the homeowner requesting I remove the lien. The builder never returned to the job to finish. They had paid him in full up to that point, which includes the kitchen. He has since stopped doing business, so they have no recourse with him, and I should remove the lien so they're not paying twice for their kitchen. So I'm left holding my hand on my butt. I told him I'd get back with him. I know what my gut is telling me, but what do you think?

Forum Responses
(Business and Management Forum)
From contributor G:
One bad guy... two good guys. Classic question: Which of the two good guys should suffer because of the bad guy? Who was in the position to have prevented the bad guy walking off with your final money? Is your gut telling you that the homeowners should not have "paid him in full up to that point" without a full release of liens from all subs? (On the other side, did you put the homeowners on notice by complying with the lien requirements of the state where you did the work?) Not legal advice, just a suggestion about where your head and gut should be at...



From contributor W:
This is a tough one for sure. You don't want to be a tool, but you should be compensated for your work, which they received. (Insert obligatory talk to a lawyer comment here.) Thought about compromising, and settling with them for your costs?


From contributor I:
You are still holding a good hand and it is your turn to deal. They can not close on that house until you are paid. Your family comes first. Call the homeowner's bank and ask for the mortgage department and you will have your money tomorrow.


From contributor H:
I just went through this with a client. Do not remove the lien. They paid the builder. That's their problem. You were not paid. They were aware of the lien and could have made the builder assure them in writing that the lien would be removed. Once you remove that lien, these folks will never pay you.

I liened a home recently and got paid when the homeowner needed to refinance the home to complete it. The bank would not until I was paid and removed the lien. They need to sue the builder for the amount they are going to pay you for removing the lien.

Again, do not remove the lien just because they ask you, without payment. Their problems are not yours, but you are theirs (not by your doing).



From contributor R:
Don't know about your state, but here, in order to be licensed, the contractor has to post a performance bond with the state for just these kinds of things. If the contractor was operating without a license, it is a criminal offence and the state will go after them. But that won't help you.

I have never heard of any jail time, just big fines - governments only want the money; they don't care about the victims.

The homeowner can sue the contractor in small claims court (very little cost and no lawyers allowed). Not paying you is a contract breach. You can't force payment for a SC judgment, but you do then have a legal claim that you can take to a court that can force payment plus costs and fees.

If you have followed the rules, there shouldn't be a problem getting most if not all you are owed. Don't be afraid of the legal system; generally it works.

I have sued in small claims twice and collected both times, and once in tax court where the IRS lost. It takes time, and if you're busy you might not want to spend it this way. All it takes for people of poor character to continue hurting others is to get away with it.



From contributor L:
Do not for any reason remove the lien until you are paid in full. It may not be their fault that the GC ran off with your money, but it isn't your fault either. Get what is owed to you. Do not back down.


From contributor O:
Call the GC bond holder and file with them. You will get paid. I have done it.


From contributor C:
You had better get a lawyer, because in some states you can get sued. Don't remove the lien, just check on it. Also, did you have your "Right to Lien" notice on your original invoice, and is this what your state requires?

I have a lien right now on a huge developer that is ready to break and when they do, I will finally get my money, three years later.

Know your rights for your future business dealings and never remove a lien until you have your cash. If the homeowner is that naive, tough.



From contributor B:
Do you think there is any chance you will see the whole amount owed to you? I suspect you don't see this as a realistic possibility. If that is the case, then perhaps a compromise is in order. Both you and the homeowner have been taken by this guy. If the homeowner is a conscientious individual maybe he can see this from your perspective as well as his own. Consider offering to remove the lien for half of the amount owed.

If he agrees, then you at least see half of the money owed and the homeowner is only out half of the lien amount. Like in all compromises, no one is completely happy, but maybe everyone walks away with a deal they can live with. You could still pursue suing the contractor for the difference... an amount you could probably handle yourself in small claims court.



From contributor S:
I agree - leave the lien in place. The homeowner should have required lien releases from all subs and suppliers prior to making the final payment. Learn your state's lien laws, as some states allow liens to drop off if not renewed periodically.


From contributor J:
Leave the lien in place, and hold out for your $3800. You did everything right, and the homeowner and builder screwed up.

I have a former friend that owes me $1750 for a large cabinet they ordered 8 months ago. He's an electrical contractor making very good money, and he liens all of his jobs, and complains if someone doesn't pay him, but he won't pay me, the cabinetmaker.



From the original questioner:
Man, what a response - thank you! Here's another part of the story that will really rub you (it does me), and will answer some of your questions.

After completing the kitchen install there was one final piece of cabinetry to be made unrelated to the kitchen. I purposely left it out of the initial project to shorten my completion time. When I had not been paid by the builder, the homeowner asked if I would do this direct to them so they could get the home finished and move in. Like a dope I agreed, thinking I might have some leverage and still get paid. They knew I wasn't paid in full for the kitchen. They also knew I was planning to lien as a result to force the builder. There was also work left unfinished by the builder. I even offered to send one of my guys over to complete the work so I might get back some of the balance due. All fell on deaf ears - they "had already paid the builder." By this time I already had the lien in place and showed them the copy sent to the builder. They were well aware of what was going on. Oh, that last cabinet? Kick me in the teeth. I was not going to deliver it unless they paid all the balance in full. They raised such a fuss because they had contracted me direct for this, and since this piece had nothing to do with the kitchen, I shouldn't hold up completion. They were going to work out the kitchen with the builder. Begrudgingly and against my better judgment, I delivered and installed the last piece. What a dope!

I don't know if there was any bond posted for the project by the builder; I suspect not. So there's no recourse there. I thought of negotiating a partial settlement but that's going to be tooth pulling as well. I know this guy. One card I might play that I thought of earlier today is a referral. The wife works in real estate and has often said she would refer me. They do like my work! A referral that led to a sizeable project could be enough to clean the slate. That might be my best shot. I wouldn't release the lien until after I got deposit from this referral. It would be a win-win for them. A referral is painless - they know the work is good so they're not putting themselves out on a limb. I'd have another project in house.



From contributor O:
In my state (CA) all contractors are required to be bonded. You have to have this bond in force or the state knows fast. This is not a bond for the job, but a general bond. I have filed against a GC bond and gotten paid for the job. The bonding company will force the GC to pay or if he is belly up, they will pay and sue him personally. If you have a proper contract with the GC, the bonding company will pay. The only problem I see with this is the time. One year is a long time to try to get paid. The bonding company may not honor the bond after 1 year.


From contributor G:
We are not on the same page and I believe you are not tracking this quite right. I will not give you specific legal advice - go to small claims court or a lawyer.

You said: "They also knew I was planning to lien as a result to force the builder." But the lien is not against the builder, it is against the house! A lien gives you a special right - if you need to go to court to enforce the lien and you win, then that right is to be able to force the sale of the house to pay you off. That is big leverage. Usually that is so big a stick that homeowners - and especially lenders and banks - will not make final payments until they see the lien releases in hand, because otherwise they are in line after you. If the house goes to forced sale to satisfy a lien, you get your money before the bank or owners get anything. If your lien is on file first. Even if you are not first, they will not want the house sold. The lien is not against the builder. The builder's contract should provide, and bank lending documents do provide, that they don't settle up until all liens are released.

Make sure you do the lien correctly in the first place, and watch for time limits! (There is some legal stuff here that you really need to know, and that either means you look it up or talk to an attorney for advice on how to lien and what to do later.) If you do it right the state has given you a whole lot of leverage. And if you have or can still lien for the later cabinet, then it will be covered as well.

Even if the owners sold the house to someone else, if you did it right your lien is there. Remember - the lien is on the house.

1. It is not fair for the homeowner to have to pay twice.
2. It is not fair for you not to get paid.
3. The problem happened because the owners paid the builder in full, as you said earlier, without getting lien releases. They made the problem, they can work it out with the builder. They gave your money away! It is up to them to get it back, or you foreclose on the house.



From contributor H:
Can you now see how they played you? And they are still playing you with the referral offer. Keep that lien there. They want it removed for a reason. They need it removed. Most likely sooner than later they will need it removed bad enough to pay you. Stand your ground. We have all been played by nice people we sort of feel bad for.

Lastly, how do you know the builder was in fact paid the full contract price? Did he tell you he got all his money? Did they show you their final check and the contract? Doubtful.



From contributor Q:
Are you kidding me about the referral? A new customer should be paying for this old customer's problems? And you are willing to just throw $3800 of profit out the window? (I can see it now: you get a deposit check for a new job, you release the lien, then the new job gets canceled for some reason. Finally, the new customer fights you in court and gets their full deposit returned. It turns out that the referral was to friends of theirs.)

And, you really believe them that they would be willing to give you a referral after they talked (conned) you into delivering that final cabinet?

They played you last time, and would be more than willing to do so again with a referral. (And they will probably tell their friends how they can also get a $3800 discount on their project.)

Please reread your last post out loud to yourself, then tell us if you really want to be a dope again. Remember, those are your words, not mine. There are better ways to spend your time than chasing possible work from this source. Leave the lien in place, protect your rights with regard to this project, and move on to better opportunities.



From contributor A:
How strong is your contract? Who signed the contract? I believe in Connecticut that as long as there is a signed contract the homeowner (the true customer) is responsible for all costs to subcontractors.

The goods are in his house. He has a dispute with the contractor. You have a dispute with the customer. The contractor was a hired representative of the customer.

Leave the lien in place. Threaten to sue the homeowner in small claims court. If it goes to court it will cost you less than $50. Connecticut raised its small claims to $5k a few years ago. Often you can get a cheap attorney to write a threatening letter to the customer for $100.

Who's to say the homeowner is not lying to you? The onus is on the homeowner to pay. The key to this whole problem is your contract. Please describe it in detail.



From contributor X:
My feeling is you're getting played... or at the very least are going to get the shaft on this deal. I'd keep the lien in place.


From the original questioner:
Okay, you have me thinking again. I did consult my attorney prior to all this and the lien is in fact against the property. Presenting this lien to the builder only initially was to show him I wasn't screwing around anymore. Pay the balance and the lien goes away and the homeowner would not be involved. Little did I know at the time that he would not return to the project. What I showed the owner was the returned, unopened registered letter I sent the builder. When they showed little concern, I sent them their own copy. I will check to see if a renewal is required to maintain the lien. July 11, 2008 was the file date.

The last cabinet I did for them direct did get paid in full, but I lost my leverage by not insisting on getting paid the kitchen balance prior to delivering that item. I was in a very awkward spot. They were paying me for the work I did for them direct, but not for the work done for the builder on their behalf. Part of me was working in good faith (slap me on the back of the head), the other with a weary eye for getting taken.

I don't believe there was ever a bond posting on this job although it was a very significant reconstruction to this home. I'll have to do some homework on that. I would think the owner would have mentioned that. I do question their interpretation of paying the builder in full but I have no way to substantiate that, nor should I care.

Contributor A is right - here in CT the GC is responsible for paying subs and is required to get release of lien forms from each sub upon final payment. That never happened though.

I'm wondering if this isn't coming up now after all this time because they're trying to refinance for a better rate. This crappy economy might be offering them opportunity and I've become an unexpected stumbling block? They've had this lien in their possession for a year and only now they want to address it. This conversation should have happened 11 months ago if they were concerned.



From contributor G:
Your analysis that they need the lien cleared to refinance is quite likely.


From contributor B:
Now that you've added more details about the homeowner I too have to wonder just how honest they are. Seems to me you are dealing with two that are less then scrupulous - both your ex-friend contractor and the homeowner.

Leave the lien in place. If they want to refinance they will be forced to pay you in full. I too am in CT and although I don't know the law, what I've seen in the past shows that the lien is not released until you do so. Even though you are owed a lot of money you are actually the one in control right now. Sooner or later I think they will cough up the money to clear the lien.



From contributor C:
Do not remove the lien until they have given you a cashier's check, period.


From contributor V:
Leave the lien on! Go get a lawyer - so what how the homeowner feels. Talk to the bank that paid the bills without lien releases. Maybe strong arm them as well.


From contributor Q:
I would leave the lien in place until the cashier's check clears, then a few extra days to be sure it is legit and cannot be reversed for any reason. Talk to your bank about this when you deposit that check. Or better yet, cash the check at the bank it is drawn on and take cash with you.


From the original questioner:
Thanks again for all the input. I did call the city today to find that liens do not expire and that only a Release of Lien can remove it.

I've gone back to reread all of your posts several times now and each time I get more PO'ed over this and the owner's arrogance. The "nice guy" side of me wants to let them off the hook in an amicable way, which will probably mean I take a hit to some extent. That's also the guy I should have slapped in the back of the head in the first place. The realistic side agrees with you all and is screaming "are you crazy?!" So not to give up the only leverage I have, I'm leaving the lien in place. I'll know soon enough if this sob story is a ploy for them to refinance. I'm thinking more and more that's got to be what's going on. It could also mean I might actually get my money!



From contributor Q:
Good decision to leave the lien in place until you are paid in full. Do not take this situation personally. Treat this like a business transaction and do not let your personal feelings get in the way. Leave the emotion out of the decision. Don't continue to beat yourself up over this one. Sometimes just saying no to someone is very hard to do, but it is the right thing.


From contributor A:
I believe you failed to answer for your contract. Please describe it for the forum. Also I seem to remember something about having to "renew" a mechanics lien every year. You can also get screwed (I learned this by being patient) by the lien expiration date in some states. In Rhode Island it's 90 days. After that you have no legal right to file a mechanics lien. Every state is different.


From the original questioner:
The contract I had was with the contractor/GC and not directly with the homeowner. My contract template was originally drafted by my attorney. I tweak it for each specific client but it is binding and legal with insurance and licensing details included. It specifically gives me the right to lien for nonpayment. Now the details of the kitchen are signed off by the client through the GC, but I don't know how much info he gives them. The pricing I give him, for instance, is his to share or mark up, his choice. As long as the details and costs are signed off by the GC, I have to assume there is client approval.

Also, I did in fact call the city in reference to expiration of liens and they assured me that they stay in place only until formally released by a Release of Lien form, and that can only be issued by the lien holder, me.



From contributor T:
They probably need the lien removed to refinance or sell. The pay status or breach with the builder is not your issue. The law is clear on this. If you have not been paid, the buck stops with the owner. Politely tell him the lien will be released at closing for $3800.

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