Replies

1. 
   EricPaulson | Sep 16, 2004 05:30pm | #1

   Are you telling us that the contractors legal kit includes such language?

   Just curious. I've never heard of it. A lien,yes.

   Your clients are financing the project correct? Wouldn't that preclude you from being able to actually foreclose on the property? I would think that only the lending co. would have rights to the first lien.

   It should be interesting what you find out.

   Eric

   Every once in a while, something goes right!

2. 
   CapnMac | Sep 16, 2004 05:39pm | #2

   I've heard that soem of the newer developments with "built in" HOAs, the developer "vests" the HOA with some portion of the entire project.  The individual HO can then only own 95-99% of the property, with the HOA having "mortgage" rights over the property in perpetuity.

   That gives the HOA some enforcement "teeth" that they would not normally have.  To my thinking no one in their right mind would finance a mortgage note for 97.25% ownership of a house--but that appears to be the case.  (Truth be told, there's no way I'd ever subrogate my ownership of a house to anyone other than a mortgage lender--and then, only to one and only the one time; but, I'm stubborn that way).

   Personally, I always found a regular lien to be strong enough leverage (excepting for criminal behavior on the HO's part).

   Occupational hazard of my occupation not being around (sorry Bubba)
3. 
   rjw | Sep 16, 2004 05:45pm | #3

   In what kind of situation?

   As a general rule, parties to a contract can agree to almost anything, so you theoretically could include such a clause.

   Courts really don't like foreclosing though, so the reality of actually being able to use such a clause is pretty slim.

   A wise homeowner would be highly resistent to such a drastic remedy.

   You would also almost certainly have to file the contract as a form of mortgage.

   For a really major job, it might make sense, for anything else probably isn't worth it.

   I know if a contractor doiong something "routine" proposed that to me I'd quickly show him or her to the door.

   ---

   ---

   Sojourners: Christians for Justice and Peace

1. 
   EricPaulson | Sep 17, 2004 02:21am | #6

   In case he takes a while to get back........he's building a custom home for a client.

   EricEvery once in a while, something goes right!

4. 
   jackplane | Sep 16, 2004 06:39pm | #4

   To successfully obtain a foreclosure on a property, you'd have to be holding the note to begin with, or at least have a 2nd trust on the property.

    This sounds extreme for standard contract language where a lien is the norm.

5. 
   BillHartmann | Sep 16, 2004 07:16pm | #5

   Can you afford to foreclose?

   I am not sure, but I would suspect that this would be a serach of liens.

   In effect you would get a lien until the bank paid that installment. Then that lien would be cleared, but the bank would then have lien of that amount.

   For example the project is for 1 mill, 5 payments of 200,000 to keep it simple.

   You have already been paid for 3 stages, so the bank now a lien of 600,000. And since the last payment you have put out $75,000 and this go to h*ll in a handbasket.

   If you foreclosed you would have to pay off the banks $600,000.

6. 
   davidmeiland | Sep 17, 2004 05:58am | #7

   Bob, your post says 'payment dispute' but I assume you mean plain ol' non-payment. If there's a dispute, your contract either specifies arbitration or it doesn't.

   I'm not a lawyer but I don't think there's much difference between the lien process that builders typically have available, and the foreclosure process that lenders have. You're not paid, you go to court to foreclose, or to perfect a lien. The property is sold and you get your share of the proceeds. I suppose in foreclosure you could end up with title to the property, whereas with a lien you won't.

7. 
   blue_eyed_devil | Sep 30, 2004 07:05am | #8

   Bob, your getting some wild advice on this question.

   Briefly....every state has their own specific laws regarding real estate. Here in michigan, we place mechanic liens. We have to sue within one year to collect. If we win the suit, we might be able to foreclose, or have a charging order placed. What state are you in?

   don't get your legal adivce from dolts like me. I spent a whopping 4 hours in a lien law seminar and promptly forgot everything the moment I hit the parking lot. I did manage to sell our company and landed two framing jobs this summer. However, we weren't a good fit and I doubt that we'd ever do more biz.

   We did get paid....

   blue

   If you want to read a fancy personal signature...  go read someone else's post.