Contractors can file lien, so ask for release if you pay off debt
Q. I am writing to you about our homebuilder who recently announced he was going to file bankruptcy. We recently received a notice from one our builder's contractors (landscape company) that they filed a lien on our home because the builder failed to pay them for services rendered. The lien on our property is related to some warranty work that was done by the landscape sub-contractor that amounted to $225. From what I have been able to ascertain, we cannot sell or refinance our property until this debt has been satisfied with the sub-contractor. I have attempted to call the landscape sub-contractor but he does not return my calls. I guess my questions are as follows:
Can this sub-contractor file a lien against our property?
Do we have to pay the builder's debt?
What recourse do we have, if any?
Since the amount owed is relatively small, should I just go ahead and pay off the debt because it would not be worth hiring an attorney to fight this?
Once the debt is paid off, is it the landscape sub-contractor's responsibility to remove the lien or do we have to do it?
A. To answer your questions:
Yes, they can file a lien. Any time a contractor provides materials or services to a property that benefit that property, the property is subject to lien.
If you elect to pay off the debt, insist that in exchange for the check, you are given a Release of Lien. Once that release is recorded, the lien is removed from your property.
As to your options, if it was me and I had no plans to sell or refinance in the near future, I would do nothing. The contractor must foreclose the lien (file a lawsuit) within two years of doing the work or the lien falls. I do not believe (though I could be wrong) that the contractor would go to the trouble and expense of foreclosing a mechanics lien over a $225 debt. The filing and sheriffs fees alone would be over $300.
I think the filing of the lien was an attempt to intimidate you into paying the obligation. Virtually no one files a lawsuit for $225. If the thought of a lien on your home bothers you, offer the contractor $50 or $100 to resolve it. If that doesn't work, sit. I doubt you would ever hear another word about it.
You have one other option. The mechanics lien act contains a provision that allows you to serve notice on the contractor demanding he or she foreclose the lien within 30 days. If the notice is executed and served properly and the contractor does not foreclose within 30 days, the lien falls. If you serve the notice and he does file to foreclose the lien, you could still negotiate a resolution.
Q. What is the difference between a land trust and a living trust?
A. A land trust is created by conveying the property to a third party, usually a bank, which holds title to the property for the benefit of the beneficial owner. The beneficial owner controls the property through a document known as a trust agreement. The agreement provides, among other things, who holds the beneficial interest in the property, who has the right to direct the land trustee and what occurs in the event of the beneficial owner's death or incapacitation. Land trusts generally only hold real estate.
A living trust is created by drafting and executing a living trust agreement. Subsequent to executing the agreement, assets may be conveyed into the trust. The trust agreement dictates who controls the trust and again, what occurs upon the death or incapacitation of the trustee. Living trusts may hold a variety of assets, such as real estate, bank accounts or personal property, such as jewelry.