Check out some similar questions!

UpperMich2008 · Oct 16, 2008, 01:53 PM

Hello!

I'm hoping all of you knowledgeable folks can help me out :)

I purchased a new home last year in Michigan. The title work was fine (showed no outstanding liens) and I was able to mortgage the home with no problems. Now, over a year later I receive a summons in the mail. I'm being sued because apparently a sub contractor failed to pay his supplier. The subcontractor, my mortgage company and the Michigan Homeowner Construction Lien Recover Fund are also defendants. There was a construction lien placed on my property just days prior to my loan closing, but the title company did not catch it. I have never met the subcontractor and I did not hire him, the general contractor did. I purchased the home when it was finished.

So, what should I do? I have 21 days to answer with the court. I feel the lien should be released from my property and the subcontractor and supplier should leave me out of this. I had nothing to do with it. I paid over $200,000 for a home and have title insurance. Why am I getting dragged into this and what can I expect? Thank you so much!

rockinmommy · Oct 16, 2008, 02:08 PM

I would contact the company who you purchased title insurance through. Your title insurance should cover this - especially since the lien was actually placed PRIOR to the closing.

Whatever you do... don't just NOT show up to court - even IF the title ins. co. says they're taking care of it.

Did you use a realtor? Did you buy directly from the builder? Was this a spec home, or custom? I'd start contacting anyone and everyone involved. YOU should NOT be liable for this lien, but YOU are going to want to follow it through to conclusion to make sure the lien gets lifted, and if there is a judgement against any or all of you that it gets satisfied and doesn't wind up on your credit report, etc.

UpperMich2008 · Oct 16, 2008, 02:21 PM

Thanks for the advice rockinmommy. It was a spec home that we saw when it was almost finished. We purchased it when everything was done and the certificate of occupancy was issued. We did not have a construction loan (with draws) since the home was already finished. We did use a realtor. The supplier is owed like $1000. What are the odds they will come after our home? Part of the complaint asks the court grant the following relief: "...establish the statutory proceedings required to sell the property to satisfy plaintiff's lien claim and order that the property by sold"

rockinmommy · Oct 16, 2008, 02:29 PM

I cannot imagine that would happen. I guess it could, if you just sat back and did nothing.

My guess is the subcontractor has disappeared, the genral contractor probably told them he wasn't going to pay it, so they're coming after the property itself (which is where the supplies are located.)

Who have you talked to? I'd start making calls... in this order...

1. Title company
2. General Contractor
3. Realtor
4. Mortgage company

UpperMich2008 · Oct 16, 2008, 07:21 PM

Thanks again for the advice. I'll start making some calls tomorrow. One more question - I've already refinanced (and yes, the new title company missed the construction lien as well!) Which title company would be the one to protect me? The original one from when I purchased the home or the most recent one that I refinanced through?

rockinmommy · Oct 17, 2008, 05:49 AM

This is my opinion - I'm NOT positive about this, but pretty sure... I think when you take out a new title policy it basically cancels out the previous policy. If you read the policy(s) it should clarify exactly how long they remain in effect.

Please keep us posted on the outcome of this.

ScottGem · Oct 17, 2008, 07:34 AM

I agree with mommy. The likelihood of you being forced to sell the property to satisfy a $1000 lien is just about nil. If it really came to that, you could pay the $1000, then sue the general contractor yourself.

What I would be doing is trying to get yourself removed from the suit. Since you bought a home after construction was almost complete, you had no part in the construction.

UpperMich2008 · Oct 17, 2008, 09:37 AM

I spoke with both title companies today and they both seemed helpful. Both said they would be contacting me within 2 days or so. I'm hopeful they will represent me and make this go away. I have 21 days to answer the summons, does anyone think the title company will help with that? I'm not sure how to answer the complaint? I know at least one of them has a staff attorney. If they didn't (and I were them), I would just pay the $1000 to get it over with since that seems like it would be cheaper than paying legal fees.

Just curious, if the title company takes care of everything, pays the lien and the lien gets discharged - do you think the title company will sue the subcontractor to get the money back? He is the root of the problem and while I definitely shouldn't have to pay a dime, it's unfortunate that if the title insurance takes care of it the subcontractor wouldn't have to pay anything.

ScottGem · Oct 17, 2008, 10:12 AM

Yes, if the title company is representing you then should file the answer. But the answer is simple:

Please take this letter as notice of my Intent to Defend against this suit, since I am, in no way, responsible for these charges.

rockinmommy · Oct 17, 2008, 12:17 PM

Originally Posted by UpperMich2008

I spoke with both title companies today and they both seemed helpful. Both said they would be contacting me within 2 days or so. I'm hopeful they will represent me and make this go away. I have 21 days to answer the summons, does anyone think the title company will help with that? I'm not sure how to answer the complaint? I know at least one of them has a staff attorney. If they didn't (and I were them), I would just pay the $1000 to get it over with since that seems like it would be cheaper than paying legal fees.

Just curious, if the title company takes care of everything, pays the lien and the lien gets discharged - do you think the title company will sue the subcontractor to get the money back? He is the root of the problem and while I definitely shouldn't have to pay a dime, it's unfortunate that if the title insurance takes care of it the subcontractor wouldn't have to pay anything.

It's tough to say what the title company would do... your thinking is right on - it may not be worth their time and trouble.

The subcontractor definitely is the root of the problem. The "tree" of the problem (if you can get my funky analogy) is the General Contractor. HE had a responsibility to oversee the subs he hired to complete the work. So, while he'll probably just be left out of it, in my opinion the responsibility should fall on his shoulders (it was his house before it was your house), and then he, in turn, can go after the subcontractor. Did that make any sense?

Please let us know the outcome.

UpperMich2008 · Oct 23, 2008, 12:22 PM

Well it looks like the title company is stepping to the plate and taking care of this mess. I have an email from the supplier's attorney that states the supplier will accept $1000 and drop the lawsuit against us and release the lien on our home. The title company is mailing them a check today! Upon receipt of the check, their attorney will deliver a signed dismissal of the lawsuit to the title company and a signed discharge of the construction lien in recordable form. Sounds like it's all set, anything I'm missing?

ScottGem · Oct 23, 2008, 12:40 PM

Great! Thanks for keeping us posted.

rockinmommy · Oct 23, 2008, 05:22 PM

Originally Posted by UpperMich2008

Well it looks like the title company is stepping to the plate and taking care of this mess. I have an email from the supplier's attorney that states the supplier will accept $1000 and drop the lawsuit against us and release the lien on our home. The title company is mailing them a check today! Upon receipt of the check, their attorney will deliver a signed dismissal of the lawsuit to the title company and a signed discharge of the construction lien in recordable form. Sounds like it's all set, anything I'm missing?

Thanks for the update. THIS is exactly why one buys title insurance!

The only other thing that I really think you should do is file complaints with the local Better Business Bureau, Chamber of Commerce, and any local builder's groups, as well as whatever entity licenses builders in your area. Definitely report the sub-contractor, and I really feel like the builder needs to be reported for this, as well. He should have had a handle on this and never should have paid that subcontractor without proof that the materials were paid for and he had a signed lien release from the sub. He's the one that dropped the ball... it just worked out for him that the house was sold before the problem surfaced.