Dealing with Builders and Liens: A Real Estate Cautionary Tale

Refusing to pay a builder can be a complex issue and depends on several factors including the terms of your contract, the quality of work done, and any disputes that may have arisen. Here are some key points to consider:

Contractual Obligations

Review your contract with the builder. It should outline payment terms, milestones, and conditions under which payments are made. If the builder has not fulfilled their obligations as per the contract, you may have grounds to withhold payment.

Quality of Work

If the work performed is substandard or not completed as agreed, you can raise these issues with the builder. Document any deficiencies and give the builder a chance to address them. This is especially important if you are entangled in a real estate transaction, as highlighted in the following story.

A Real Estate Cautionary Tale: Home Purchase and Unexpected Liens

I recall a particularly challenging situation when purchasing my first home. The market was hot, and sellers were demanding strong financing or even all cash. I, however, had neither. My agent, in his efforts to help me, found a motivated couple eager to sell their small starter condo. By the time we got to closing, an unexpected twist led to the discovery of a hidden lien on the property.

At the beginning of my home search, everything looked great. However, the seller had failed to disclose a second lien on the property. This lien resulted from their refusal to pay a contractor they owed. The contractor, with the evidence provided, obtained a judgment against the seller and placed a lien on the condo. By all means, I am not perfect, as I have encountered liens in my 20 years of real estate investments, but property liens are not typically hidden from the seller, especially when legal proceedings are involved.

The process of clearing a lien generally requires settling the debt with the claimant, paying their legal fees, and sometimes interest. Alternatively, one can choose to ignore the lien, as the couple in this case did. However, they quickly learned that ignoring the problem would not make the lien disappear. By the time we got to closing, the title company had to pay off all liens tied to the property, including the second lien, leaving the sellers much less than the unexpected windfall they were anticipating.

Dispute Resolution

Many contracts include clauses for dispute resolution such as mediation or arbitration. It is often advisable to follow these procedures before refusing payment outright. In this case, the sellers ignored the lien issue and tried to walk away from the deal, which can have significant legal consequences.

Legal Consequences

Refusing to pay without a valid reason can lead to legal action from the builder which could result in additional costs for you. This tale of unforeseen property liens serves as a cautionary reminder to always thoroughly investigate and disclose any issues before finalizing a real estate transaction.

In summary, while you may have valid reasons to refuse payment, it is essential to proceed carefully and consider seeking professional advice. Remember, the secrecy of property liens can be misleading and can complicate the process of settling or selling a property, as illustrated in this story. Always approach such situations with transparency and due diligence to avoid costly disputes.