Five unpaid contractors have filed mechanics lien claims worth $152,000 on a strip mall in Georgia. The property owner, UA investments, filed for bankruptcy in early August 2020.
1600 Shorter Ave in Rome, Georgia, is one of the many shopping centers throughout the country with no occupied storefronts. UA Investments purchased the property in 2016 to give new life to the ‘80s strip center. 1600 Shorter Ave is in the main retail area for the small rural town.
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The property has 3,700 square feet zoned for a gas station with convenience store, nail salon, restaurant and multiple retail fronts. There are 96 parking spaces, close proximity to Shorter University, and accessibility by 2 major highways. In spite of the promising location, the property was only able to maintain about 34% occupancy, according to the listing on LoopNet.
Property owner UA Investments files for bankruptcy
The owner of 1600 Shorter Ave, UA Investments, filed for bankruptcy on August 4th, 2020. Meanwhile, the property has 5 liens totaling $152,000.
Each of the mechanics lien filed on the property is past the enforcement date. The liens remain on the property, but they cannot be enforced. However, the contractor can submit a preservation of the lien during the bankruptcy proceedings. Preserving the lien can extend the enforcement period of the lien, making the probability of receiving payment greater.
Unsecured and Secured Debts
When a debt is unsecured, the property owner- and the property itself- does not have an obligation to pay outstanding debts concluding the bankruptcy proceedings. Meaning a contractor does not have to be paid.
What Does This Mean for 1600 Shorter Ave Contractors?
UA Investments filed a Chapter 11 bankruptcy, giving the developer time to consolidate their assets and liabilities, then determine how they will pay on outstanding debts. For all contractors with outstanding debts, each contractor will have to file their liens under the bankruptcy to preserve the lien. Filing for preservation of the liens gives contractors a higher probability of receiving payment.
The 5 contractors have to wait and see what happens with the bankruptcy proceedings. They cannot enforce the lien(s), and the preservation filings make the liens enforceable after the case has closed. Even then, there is no guarantee of payment.
The only option available to the contractors might be to foreclose on the property, with the debts transferring to the new property owner. The deed is under UA Investments, but ownership could change hands following the bankruptcy case.