Mechanic's Liens: What You Must Know, and How to Avoid Them
January 22, 2010
Your project to add parking to your homeowners association has
been fraught with problems from day one. You've argued with the
contractor over all the additional charges that seem to
materialize out of thin air. Your board is sick and tired of
dealing with the constant frustrations and decides it will simply
nod and smile to the contractor until the project's done. Then
it'll simply refuse to pay all the additional charges the
contractor is trying to impose.
This week's tip explains why that's like sending an engraved
invitation to a contractor to file a mechanic's lien against
your HOA, which is a very bad idea.
"A mechanic's lien is a statutory lien that allows certain types
of vendors to have a lien against real property when they've
performed construction-type services that benefited that real
property," explains Matt Zifrony, who advises homeowners and
condo associations at Tripp Scott, a Ft. Lauderdale law firm,
and who's also the president of a 3,000-home association. "It's
a pretty powerful tool contractors have if someone they've done
work for refuses to make payments."
It's powerful because many lenders refuse to lend for properties
with liens attached to them. They'll require the lien be paid
before any new loan may close. So if a pool construction company
slaps a lien against your association, and your board later
wants to secure a loan to build a clubhouse, it's likely your
association won't be able to secure financing until the pool
lien is removed from the association's title.
To avoid a mechanic's lien dispute, start by using a proper
contract. "Where I've seen issues, there seems to be a bad habit
of a contractor giving a board a verbal or written quote, but
the board doesn't sign a written contract," says Jeff Vinzani,
an attorney at Nexsen Pruet LLC in Charleston, S.C., who
represents associations.
"All the board has is a quote that doesn't spell out what to do
if there's a default: What will the contractor do if he's not
on time? How will payments be made? Can there be a holdback if
the contractor doesn't do what he's supposed to do? Have a
lawyer draft a real contract instead of what the contractor
offers, which often isn't a real contract and doesn't have
any depth to it."
To learn the 6 steps you can take to protect your HOA against mechanic's liens, see our new article. Go there now »
Best regards,
Matt Humphrey
President
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