Mechanics liens are only found in the news every so often. Typically, it will be a story of contractor fraud or dodging potential pitfalls when recovering from a disaster. However, from time to time a lien is filed against a noteworthy name. In September, the big story was about a mechanics lien filed against Beyoncé and Jay-Z’s $90M property in Los Angeles. Staying out west, it looks like the new hot lien story is about two mechanics liens filed against the Sacramento Kings.
Believe it or not, this isn’t the first time that the Kings have made it onto the blog – a little over a year ago we mentioned that the Kings utilized drones in the construction of their new arena.
Two Liens Against The Sacramento Kings
Anyway, the two liens against the Sacramento Kings total over $6.3M. The liens aren’t on their arena, but on the surrounding development. The project aims to breathe life into downtown Sacramento with a “lifestyle and entertainment district” that will include a nightclub, condominiums, restaurants, and other attractions. Liens were filed on a hotel being built next door to the arena.
The liens stem from one of the project’s largest contractors and a supplier on the project. The subcontractor’s lien, totaling $6.06M, arises out of foundational work, as well as work done on floors and pillars. The supplier had gone unpaid after providing concrete forms as well as other materials. Making matters more complicated, units in the building are being sold as condominiums and the liens could cloud the title of current and prospective unit owners.
Check out our Stadiums installment on the What’s Your Project Type series for more on stadiums and construction payment.
Wait, what is a mechanics lien?
Posts like this one might bring in some people who are less familiar with mechanics liens, but don’t worry. We’ve got you covered: Mechanics liens provide debt security in the construction industry. Put simply, after going unpaid for providing labor and/or materials on a construction project, the laborer or materialman can file what’s called a mechanics lien on the property where work was done. By filing a mechanics lien, the debt attaches to the property where labor or material was furnished, clouding the owner’s title.
If a claimant remains unpaid, they can enforce the lien and foreclose the property (but it typically doesn’t come to this). As a result, the property is sold and the claimant will receive what they’re owed from the proceeds. Liens remain even if the property is sold or leased, making it incredibly difficult to borrow against the property or to sell it – a huge consideration here since condominium sales are ongoing. Because the property title is on the line when liens are in play, filing a lien claim, or even just threatening to do so, speeds up the payment process.
Liens on a project this large aren’t completely out of the ordinary, but a seven-figure payment dispute is nothing to shrug off. There is virtually no chance that the Kings let this dispute come down to a lien foreclosure, though – the project has run well over $550M and serves as one of the most impressive sports venues in the United States. Still, hopefully the subcontractor and supplier get their due – $6.3M is a lot of money left on the table. But if worse does come to worst, and a foreclosure does take place, *watch out for the Supersonics to swoop in- it’s about time Seattle got their team back.
*That’s not how any of this works.
PS. Shaquille O’Neal is a minority owner of the Kings, and he and I have a history (Ok. The Inside the NBA crew just made fun on me once on TNT…). Shaq, if you’re listening, make sure this sub and this supplier get paid!