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I filed a lien and the house got sold anyway.

Washington

I have filed a lien with you on a project i worked on. I just saw that the house was sold on 1/20/21. How did they sell it without paying off my lien?

1 reply

Mar 30, 2021

Mechanics liens don't make it legally impossible to sell property. If the buyer is willing to purchase a property with an active mechanics lien, it can be sold. Further, it's possible a seller could sell the property if they aren't yet aware of the lien, or they could potentially (and illegally) try to conceal or minimize the lien claim - in either case, the property might be sold without resolving the mechanics lien.

That being said: Usually, mechanics liens make it extremely challenging/virtually impossible to sell real estate. It's rare for property to be sold when there's an active mechanics lien present. Most mortgage companies and title companies will refuse to complete real estate transactions when active liens are present since it could totally undermine their efforts on the transaction. But if there's some reason that all the relevant parties are OK with the lien claim being present, or if the lien was unknown by one or both parties at the time of the sale, then it's possible the property could be sold despite a mechanics lien being present.

Finally, note that mechanics liens aren't automatically paid when a voluntary sale occurs. Rather, it's up to the buyer, the seller, or some other relevant party to actively go out and pay the lien claimant to remove the lien from the property. If the mechanics lien were enforced and eventually sold, then payment would take place automatically.

How to get paid when the property you liened gets sold

First, note that a mechanics lien ties directly to the property, not to any individual, company, etc. So, even if the owner has sold the property, mechanics liens generally remain attached to the property.

When a mechanics lien is filed prior to a sale, then that lien will generally have priority above the buyer's mortgage. And, that means if a foreclosure is forced, then the lien claimant is in a better position than the mortgage company. As you could imagine, that's not an arrangement the mortgage company will be comfortable with, and they'll often push for a quick and relatively painless resolution of the situation - whether payment is made by the seller or the buyer.

As a result, threats of enforcing a lien claim should hold more water than usual. And, sending a demand letter or Notice of Intent to Foreclose to the seller, to the buyer, and to the buyer's mortgage company and title company could garner some attention around the lien and lead to payment. More on those documents here: (1) Demand Letters in Construction; and (2) Construction Payment: What Is a Notice of Intent to Foreclose?

Finally, note that enforcing the mechanics lien by filing suit is still a powerful option as well. Further discussion here: What Is “Enforcing” a Mechanics Lien? If it looks like legal action may become necessary, then one of these WA lawyers might be able to assist with that: Top Washington Construction Lawyers.

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