When Remodeling Goes Bad

 


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When things start to go bad during a remodel project, you can find that your home could be at risk.

Travis and Jenny simply wanted to remodel their kitchen and build on a dining nook. They saved their money, hired a contractor and loved it when it was finished. In three months, their dream kitchen was theirs.

Kind of.

The contractor didn't pay the lumberyard for the lumber, doors and windows. The bill was in the thousands. Who did the lumberyard go after? It already knew the contractor wasn't going to pay up. The lumberyard put a lien on Travis and Jenny's home. They threatened a lawsuit to force the sale of the house.

Travis had already paid the contractor. There was no money to pay the lumberyard. After all, they had in good faith paid for the products. They were worried about losing their home. All for a new kitchen.

The lien placed by the lumberyard is referred to as a mechanic's lien. It is a basic claim against your property. Any supplier who provides materials or any person who does work on your home can place a lien for the unpaid amount on your home. Your property is responsible for the debt, no matter who originally contracted for the supplies.

In a worse case scenario, the owners of the property could be forced to sell the property at auction to cover the debt.

Most homeowners never know that the contractor hasn't paid the bills, until the lien is placed on the property. The lien could be placed on by laborers, carpenters, electricians, materials suppliers or rental equipment companies. The law simply demands that the supplier of labor or materials be paid - it isn't concerned with you having already paid someone else.

In general, the process is simple. The supplier who doesn't contract directly with you for materials or work must contact you with a Preliminary Notice that describes what was contributed to the project. The notice is usually delivered within 20 days of the supplies or work being provider. This is required. If there was no notice sent within twenty days of the work or supply of materials, there can't be a mechanic's lien on your property.

The contributor, upon non-payment, will file a Claim of Mechanic's Lien with the County Recorder's Office. The contributor then has 90 days to either work it out with you are sue you, asking to have your home sold to pay the debt.

Lawsuits are seldom filed. Many of the claims actually end up being invalid. You may need to go to court to ask for the lien to be removed before you are able to sell the property. It isn't a big deal, you are in and out in no time.

The biggest way to protect yourself is to make sure that everyone is paid. You can personally pay the subcontractors and materials suppliers. Make the check jointly to the general contractor and the subcontractor or materials provider. This will assure the payment and eliminate the risk of a mechanic's lines. This is common and most general contractors are used to this.

You can also have the general contractor obtain mechanic's lien waivers from everyone who the contractor is responsible for paying. In some states, the contractor is required to give you the waiver upon payment and before accepting further payment for additional work.

Plus, you should make sure that you are working with a legit and reputable contractor. Check all licenses and permits to make sure that everything is on the up and up. Don't just assume that you can trust your contractor.

Martin Lukac represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com , a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!

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