If I buy a house before the 75 day deadline and a lien is placed on the house am I responsible for the debt?
1 reply
Feb 10, 2020
Generally, a mechanics lien will be effective even against someone who purchases the property after the work was performed, as long as the relevant requirements were followed (i.e. notices and deadlines). Levelset discusses that principle here (for the lienor's perspective): What Happens If I Filed My Mechanics Lien After the Property Was Sold?
However, Oregon provides additional protection for those who purchase residential property and are then saddled with a lien. This protection is found at § 87.007 of the state's mechanics lien statute.
Oregon protects homebuyers from mechanics liens
If a new purchaser buys residential property exceeding $50,000, then the property seller must protect the buyer against mechanics liens that occur even after the sale is final if the work was done under the seller's watch. There are a few different ways they can do this:
(a) By providing title insurance for the purchaser's benefit;
(b) Retaining at least 25% of the purchase price in escrow;
(c) Maintaining a bond of letter of credit for at least 25% of the purchase price;
(d) Obtaining written mechanics lien waivers from everyone who provided work to the property; or
(e) Waiting until after the mechanics lien deadline to complete the sale
On the day that the sale is final, a seller must provide the purchaser with a document that specifies how they've complied with this requirement.
What happens if an Oregon seller doesn't protect the buyer from mechanics liens?
Failure to provide that document described above (relating to protection from liens) is considered a Class A violation - which could lead to serious fines or, in some cases, jail time. Further, a purchaser who's damaged by the lien claim will also be entitled to bring an action to recover up to twice the amount of the actual damages they suffer as a result of the seller's failure to protect them from liens - and the court may also award reasonable attorney fees on top of that.
Of course, if the seller makes the claim go away - by proving it's invalid, by satisfying or settling the lien claim, or by obtaining a lien release from the lien claimant, then the owner won't be held liable.
How should an Oregon buyer respond to a mechanics lien against their property?
Every situation is different, and what makes sense under one set of circumstances won't always make sense under others. But, some general principles hold true, as discussed in this article: A Mechanics Lien Was Filed on My Property – What Do I Do Now?
If a lien has been filed on your property for work that the seller had done, it's a good idea to notify the seller immediately and to demand they resolve the issue. Since that's a perfectly reasonable request, it may be enough to make that request without having to get attorneys involved. Though, it makes perfect sense to consult an Oregon attorney once a lien has been filed - and it's usually a good idea to do so. They'll be able to help navigate the dispute and advise on how to put pressure on the seller to make the lien claim go away. Plus, they'll also be in a good position to evaluate the legitimacy of the claim in the fist place.