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Home>Levelset Community>Legal Help>Can a new construction apartment building open with an outstanding lien. How can the construction lender convert the loan to perm so they can open and get an occupancy license while still having outstanding liens? Isn’t it fed regulations that construction liens must be satisfied before opening the doors? This apartment building is opening in 3 weeks and owes me $35k. It’s a valid lien that has been on the building for 8 months.

Can a new construction apartment building open with an outstanding lien. How can the construction lender convert the loan to perm so they can open and get an occupancy license while still having outstanding liens? Isn’t it fed regulations that construction liens must be satisfied before opening the doors? This apartment building is opening in 3 weeks and owes me $35k. It’s a valid lien that has been on the building for 8 months.

WisconsinLien ForeclosureMechanics Lien

Need to know how a building can open with liens on it. How does the lender allow this to happen?

1 reply

Dec 10, 2018
I'm sorry to hear you've gone unpaid. First, while mechanics liens can be very effective for a number of reasons, generally, preventing the opening of a business isn't considered one of the points of leverage from a lien filing. I'm not aware of a federal regulation that would prevent a business from opening their doors prior to resolving mechanics lien disputes. While such regulations could potentially exist, most lien claimants force payment not because a business is unable to open due to regulations, but rather, by leveraging lien rights and threatening further action. Mechanics liens are incredibly powerful - once filed, they represent a very real threat to a property owner's title. Further, when lenders are involved, mechanics liens could threaten the collateral on their loan. So by (1) making sure all relevant parties are aware of the lien filing, and (2) threatening to move forward with a lien enforcement action, many lienholders can jumpstart payment talks to resolve the issue. In Wisconsin, notice must be sent to the property owner when a lien is filed. However, a lien claimant isn't required to send notice of the lien filing to the lender. Sending a copy of the filed lien to the project lender will grab the lender's attention since such a lien can affect their investment. When the lender is aware of the lien, potentially, that can create extra pressure on the owner of the property to resolve the dispute. If the lender has been notified and that hasn't lead to payment - another option to recover might be to threaten to foreclose the lien - such a s a Notice of Intent to Foreclose. A Notice of Intent to Foreclose is a warning. It states that if payment isn't made and made quickly, the filed mechanics lien will be enforced. Nobody likes liens, but everyone really hates a lawsuit - especially when their business and property could be on the line. Thus, the threat to move forward with suit can be very effective to compel payment. If a lien claim itself doesn't compel payment, and if the threat of action on that lien doesn't get payment talks moving, it may be time to enforce the filed lien. Payment disputes don't normally get that far, but enforcing a lien does become necessary from time to time. Since enforcing a lien requires legal action, before it comes down to that, it would likely be wise to reach out to a local construction or real estate attorney. They will be able to review the relevant documentation and other information and advise on how best to proceed.
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