Legal Question in Real Estate Law in California
Mechanics lein
We own property in northern Ca. We subdivided a large parcel into four. The tentative map is approved and the final map is about 45 days from final approval through the county.
We have a contract with a contractor to provide two improvements water and road.
The contract amount is $130,000. We have paid $80,000 to date and cannot find funding for balance. He is completed with his work and is demanding payment.
We have a current note being carried by the individual we purchased the lot from in the amount of $500K. This note carries a first position when the properties are sold.
All parcels have current pending contracts with deposits in escrow and proceeds from the sale of all lots will net $1,500,000.
The problem is we just ran out of money to pay the contractor. The tentative close of escrow on the lots is Mid October.
Question is this, if the contractor files a lein, will the foreclosure of the lein take a second position behind the first note mentioned above. Will there be penalty fees on top of the outstanding contract amount that the contractor will exercise for?
After the note and lein are squared away, will we then net our final proceeds from the sale of these properties?
What else could happen?
2 Answers from Attorneys
Re: Mechanics lein
You owe the contractor $50,000 and he wants it now. Isn't there some willingness on his part, one he sees the numbers on the project and potential, for him to defer filing a Mechanics Lien? I suggest that you sit down with him and discuss a deferral of the money owed him for a bit bigger payment, perhaps another $5000 or more. It sounds like you expect to make a fair amount of money on the subdivision and, if you want to avoid headaches and legal problems, you are better off giving up just a bit of your profit in exchange.
Re: Mechanics lein
The requirements concerning mechanic's liens are strict and have a short time span for action. Please contact my office at 714 363 0220 to set up an appointment. I would like to review your written documentation including any letters, notices, and lawsuits. We handle cases throughout California. We can review your documentation by fax and speak with you by phone.
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