mechanic's lien

Hi all,
At home I am on the HOA board; we have a beach condo in MB, South Carolina where I am just a homeowner.

We had a million dollar plus renovation project done last year on the oceanfront side of the building. It started in Nov and finished in May. Since this is basically a condo of rental units the POA stopped the construction because of the onset of the high rental period. It seems there still was some remedial work to be done.

Its' a long complicated story and I think the POA was negligent in some respects.

However the POA and all the ocean front units -25 owners recieved a mechanic's lien in the amount of $284,000 the amount the POA is withholding for future work.

What's done is done and the POA lawyer and the construction co lawyer are at least communicating now.

We expect this lien against the individual units to be removed or lifted. Is there a difference between removed lien as opposed to lifted lien?

Once the lien is gone --removed or lifted and I hope this is by next week and I know the problems with having a lien on your property--- but-- will there be any repercussions for the unit owners, especially their credit rating, credit history in the future? Will this lien show up on a refinance, credit or mortgage application in the future.

It appears the POA is only looking to remove the liens on the individual units and let the lien on the POA remain. What would be the issues for a POA having a lien???

What would be the issues in the future even if the lien was satisfied,for the POA?

Thanks for any help you can give me.

Cecelia

A lien is nothing more than a unilatteral allegation that one person owes money to another. Liens are always subject to challenge and judicial review and, therefore, lack the weight of a judgment.

Mechanics liens are usually filed by the contractor himself without much guidance from an attorney. Some contractors are highly educated business people and others can barely write their own names, so the "rightness" of liens varies a lot.

Here are two examples that I know of where screwy liens were filed: First, a condo association needed a new roof but had to levy a special assessment to pay for it. The work was done before the association had collected all the special assessments and the association was able to pay only 75% of the amount due. The contractor, who was still owed 25% of the contract amount, filed liens on 25% of the units chosen at random. Second, a person who rented out industrial storage yards had a tenant who was in the construction business. Each tenant had a mailbox at the storage yards. The tenant rented a bulldozer, using his storage yard as his address. The company that rented the bulldozer filed a lien for non-payment against the owner of the storage yards even though he had not been a party to the rental agreement and the bulldozer was never on his property.

I cannot speak for the credit agencies, but I would think they would give little to no weight to liens as they are not a final judgment and are sometimes wrongly filed. In addition, credit agencies usually require SSN and date of birth for reporting and it is unlikely that the contractor has that information even if the association does.

Where liens do create a real problem is if you are trying to sell your unit. Title companies do not want to insure a property with a lien on it, so liens get paid off from the seller's proceed at closing. To avoid this the seller must complete proceedings to quash the lien before the sale.

Are your units condos or stand-alone homes with deeded lots?

Damn..no edit.

While liens can make it to ones credit report, I do not see the liens being discussed (mechanic liens) as personal liens so not an issue. I see them as liens between corporations. The owners association corporation and the construction company corporation.

Hold off on hiring the lawyer...It is your HOA's responsibility to deal with this situation NOT you as an individual. Your HOA is incorporated and you are a stock holder in it. So the HOA is representing you and the owners as a "whole". However, the documents filed in the lien process would indeed reflect the individual names. That does not make it an individual lien against all of those listed. The way things are filed ALL parties that make up the whole would be named. A little confusing I know. The amount that is listed is just your portion of the entire lien placed on the HOA. It's kind of like a special assessment. The HOA may be on the hook for 100K but each individual owner (IF 10 owners) would be listed as 10K. It's basically the lien amount divided amongst all involved.

Just make sure they don't have your social security number. The address of the unit may not be enough to damage your personal credit or show up on it. I would get a copy of your credit report as it is free to get once a year. Plus you can put a fraud alert on it. No need in paying any kind of those credit watch companies although you will get offered when you request for your report. Legally it is free to get a copy and just call one of the 3 credit reporting agencies to get a copy. They put the fraud alert on all 3 if you call just one. Good idea to check it to see if anything has changed and correct mistakes.

Thanks all,

It is so very confusing. The legal paper lists the HOA(POA) as a defendant along with all the individual owners. Exhibit A lists the limited common elements and the common elements of the condo entity and then lists all the individual units that benefited from the work.

The lawyers from board and construction co. are working together and hopefully will have these liens removed. That is where I am concerned--the repercussions of having had a lien. I think I will need to check the county office to make sure it is removed --not too trusting anymore.

Melissa ,I don't know if anyone has our social security number I don't remember ever giving it to HOA or management co. Appreciate your sugestion about having a free credit check done. We had a credit report a short time ago so we will know if there is any change.

Do you think there is one company that is better than the other?

Cecelia

You are right the contractor did have a smart lawyer and the company may need this money- it might be their profit from the job and they need it for their cash flow.

One board member did share with the owners that the contract allows for a 10% retainage and details methods for resolving disputes were in the contract. 10% would be $110,000 not the $283,000 they decided to withhold.

The board stopped the work because all these condos are primarily used for rental income. The high rental period was approaching and the oceanfront had been closed for 6 months. Also, this is the 3rd construction that has affected the oceanfront --meaning significant loss of rental income and personal use of the unit.

I don't know if there was any agreement between the board and the construction co about stopping in April and returning in the fall to complete the work.

Its a mess, I know you need to walk in someone's shoes but as treasurer here I don't think I would keep a vendor's payment without first trying to resolve the issue and if I did I certainly would make sure of what the repurcussions would be.