In the first half of this two-part article, we discussed the process a contractor will go through when they file a Claim of Lien for unpaid work, and the property goes into foreclosure. In this article, we will continue to discuss the construction lien foreclosure process, and factors that can defer your compensation. As always, it’s recommended that you speak with your Brandon construction attorney before attempting to file a construction lien. To view the first half of this article, please visit Part 1.
The Problem With Foreclosures and Mortgages
Usually when a property is foreclosed and goes to a public auction, the only problem a contractor needs to be concerned about is if there’s a mortgage on the property, which there usually is. If there is a mortgage on the property, it will stay attached to the property even after the auction. If the new owner (the highest bidder) decides to keep and use the property, they will need to make mortgage payments in addition to the purchase price of the property. Because more is owed on the property than what it’s worth, there is no equity in the property, and the new owner will lose money, therefore making it difficult to receive payment on a construction lien at auction.
What Happens if You Don’t Receive Full Compensation
As Brandon construction lawyers, we are aware that it isn’t uncommon for contractors to not be paid in full by the proceeds of a public sale. If this happens, a contractor will need to have a deficiency judgement against the owner, as if the owner owed you directly for the work or equipment you provided. However, your judgement is only as valuable as the assets of the new owner. The beginning of most problems on construction projects is lack of payment, and because most owners with money will pay lienors before their property is sold at auction, there is a higher chance that if the property was sold, the owner has no available funds and the contractor won’t be able to collect their full payment.
However, that doesn’t mean that filing a Claim of Lien is a waste of time. It just means the lien won’t automatically work as intended. We suggest that contractors in this situation make good judgement calls about when to record a lien and how far to take the lien foreclosures process. A construction attorney will be able to better advise you on this situation, and could help your chances of receiving payment or prevent your chances of wasting money on a worthless lien foreclosure.
If you are looking for an experienced Brandon construction lawyer, please call us at 813.579.3278 or submit our contact request form.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.