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If a property is sold before we get paid, do we still have lien rights, and who would be responsible for paying that?

Alabama

We are waiting for payment from an insurance agency, but they are preparing to close on a property. If they do not pay us by the time they close on the property, how does that affect our lien rights?

2 replies

Feb 9, 2021

If a mechanics lien claim is being considered, and if it appears that a sale of the property is immenent, it's usually a good idea to make sure that the lien can be filed before the property is sold. Mechanics liens are extremely powerful claims, due in large part to the fact that they make property harder to sell or take a loan against. Further, if the property is actually sold before the lien is filed, that can make recovery a bit more complicated.

So, to get the full effect and power of a lien claim, it's probably a good idea to ensure the lien is filed before the property is sold. And, it's just as important that the owner is given notice immediately so that they understand the lien will affect the prospective sale of the property. Not to mention, if the owner knows there's a lien filed, they're generally required to inform the buyer. What's more, during the process of the sale, the buyer's title company and/or mortgage company will likely become aware of the lien filing and could halt the process until the mechanics lien claim is resolved. But, if the property is ultimately sold before a lien claim can be filed, lien claims will generally run with the property.

When there's time, it's usually a good idea to send the owner a Notice of Intent to Lien as well, warning them that a lien filing may be coming if payment isn't made. But, when that notice isn't required (Alabama has no Notice of Intent to Lien requirement), and when there's no time to spare, a Notice of Intent might not always be a useful step. Regardless, if you want to learn more: What is A Notice of Intent to Lien And Should I Send One?

Valuable resources

In addition to the information above, these resources should be particularly useful:

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Feb 10, 2021

I came across these three articles this morning that I wish I'd shared yesterday, as well:

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