Building Tip

OMG Grayt idea! Thanks for the tip Yellow Hammer.

those liens are in effect for 1 year

Best way to prevent this is for you -- the customer -- to order all the construction loan draws from the bank and to pay all the bills yourself. Or, if you're paying for the project out of pocket, all the more reason. It's not that big a burden, and it's good business. If a builder won't agree to this...don't do business with 'em.

Liens are monsters and they can go several layers deep. The GC hires a roofer who buys materials. The GC payers the roofer and ther roofer doesn't pay the supplier, and on it goes. Waivers of lein are good, but limited in power. Paybills yourself is ok, but remember the layering effect that can bite you.

Before you build or remodel, get an good attorney that specializes in construction contracts. Costs $, but may well save you a bunch of grief.

My in-laws had issues building their house in Ventana Dunes. Turns out the builder was using money paid for their house to float other houses. It got ugly. Had to get the bank involved. The bank basically told the builder he was done getting money and forced him to finish the house. He was doing exactly as you said above and was not paying subs, and this was three years ago during the boom times!

It was a very ugly experience...

He was doing exactly as you said above and was not paying subs.

Pay attention to builders who look over their shoulder everywhere they go. I'm not kidding. They tend to get paranoid when there are seventeen different subs looking for their checks...

those liens are in effect for 1 year

Actually, they are renewable every year. An option if you are stuck is to bond around them but I wouldn't recommend it. Lien waivers from all subs and suppliers before payment is made to the builder is an easy way to protect yourself but it is quite a bit of work.

The problem with waivers is that there is probably someone out there that is not named and you don't know who they are until they pop up and file against your property. In many states, they can freeze your bank accounts, etc. Mechanic's lein is a powerful tool.

The best method in addition to the attorney thing is a performance and payment bond put in place before they start. In this way, you can get someone to pay off if the builder defaults.

For a lien to be valid the person / company placing the lien is required to file a Notice To Owner within the first 45 days of supplying labor or materials to the jobsite. Without this they are not in position or privity to file a lien. Having signed lien waivers from anyone / company that filed a Legitimate (timely) Notice To Owner is the best way to avoid having any liens placed upon your project.

Best way to prevent this is for you -- the customer -- to order all the construction loan draws from the bank and to pay all the bills yourself. Or, if you're paying for the project out of pocket, all the more reason. It's not that big a burden, and it's good business. If a builder won't agree to this...don't do business with 'em.

The only problem with this is that most GCs earn their money by placing a % on top off those bills and you are effectively cutting out the middleman and he is making no $$$ so he really doesnt care how long it takes etc.

Actually, they are renewable every year. An option if you are stuck is to bond around them but I wouldn't recommend it. Lien waivers from all subs and suppliers before payment is made to the builder is an easy way to protect yourself but it is quite a bit of work.

I paid for a driveway twice, and still ended up with a lien from Rinker for 20 yards. They let it expire, as I'm sure they were swimming in it at the time, and I was a micro-gnat to them.

It still goes back to the builder on all of this. A good builder will pay his bills and probably use the same subcontractors for years so is comfortable that they are paying their bills. What we have seen in this market is that during the boom times and at the end of them certain builders were buying spec property and building, but they got caught and can't move inventory because they are in the land wrong, so what is their answer to this, aggressively bid custom work so they can get cash flow to carry the specs that are sitting, which creates late-pays, no pays and liens. This hurts everyone the customer, GOOD custom builders that bid the project fairly, the architect that put them on the bid list, the vendor/subcontractor, etc......hell the only people that makes any money are the collections attorneys.

The simplest way around this is to get a credit report on the builder, both
in the name of his company and him personally. If he has a poor credit record on either report this is someone you dont want to do business with. If you cant trust your builder this will end up bad. I am a builder and someone suggested paying your own bills etc....well this is stupid because you are hiring the builder to be responsible for doing the work yet taking the power out of his hands to pay for that work...what if the work you pay for is defective, you cant blame the builder because you paid for it.

Most people assume builders are crooks but there are a few highly responsible trustworthy builders out there. There are also some jerk clients out there, the builder would be smart to get a credit check on them, and do some interviewing of those people and people they have done business with before he gets too involved.

Believe me, building a house can be a lot of fun. These "hell" stories are pretty much self imposed because of a lack of trust or of someone not doing their homework.

There are procedures and insurance to prevent you from having a hellish experience, but IMO the best way to avoid all of this is to do your homework, keep tabs on your finances, and select a quality builder who has been in business for a while. Most banks require approval of the builder & his financials, they don't want to lose $ either.

Many, many problems are caused by people trying to cut corners and save $ and it ends up costing far more in the long run.

keep tabs on your finances, and select a quality builder who has been in business for a while

True. When you make that payment to that builder, insist that he gives you copies of the bills that payment is covering and then make sure it has been paid.

Scooter, you are correct about people trying to cut corners. When someone comes up to me and the first question out of their mouth is "what is you cost per square foot?' I already assume I dont want to do business with them.

I know everybody wants a good value but even more than that you want a good house.

As an aside to the main topic here I thought I might point out that right now might be a good time to get a custom home going for personal use. Material prices are down quite a bit and I know some very hungry subs. Just get the lien waivers

Subcontractors say builder?s stopped payments

Some subcontractors say they?re being pushed to the brink of financial ruin because Mel-Re, a longtime builder and developer in Fort Myers, stopped paying them for their work.

Meanwhile, Mel-Re owner Ed Adkins? nephew Jeffery was in the Lee County Jail on Friday charged with aggravated assault after allegedly brandishing a gun at a subcontractor who was prying the windows and doors from a Mel-Re project because he hadn?t been paid.

Ed Adkins did not return calls.

But some subcontractors on the 200-unit Bella Casa condominium project under way on Plantation Road in Fort Myers say he hasn?t paid them and they?re in dire straits.

?I?m into them for a couple hundred thousand,? said Clifton Lockhart, owner of Clifton B. Lockhart LLC Inc., who had been doing metal framing, drywall, stucco and painting on Bella Casa. ?Myself and my family have spent every dime we have trying to get this building done.?

This week Lockhart and other Bella Casa subcontractors received a letter from Bank of Florida saying it will no longer be funding the project.

Bank officials could not be reached for comment.

Bank of Florida "made a final determination to cease making further advances, pursuant to its loans to Bella Casa LLC," the letter says. "Please govern yourself accordingly."

Mel-Re's conflict with a subcontractor on another project this week led to Jeffery Adkins' arrest.

At a commercial building under construction on Techster Boulevard in Fort Myers, a subcontractor was allegedly threatened Thursday by Jeffery, a Mel-Re superintendent.

"I went over there to take back some of the windows and doors that they had not paid for," said Lou Luongo, owner of Loumac Distributors. "They'd pretty much defaulted on their contract."

But as he was doing that, Jeffrey Adkins "went to his vehicle, got a gun and pretty much made it clear to me he had a gun and he was going to stop me with it," Luongo said....................

http://www.news-press.com/apps/pbcs.dll/article?AID=/20071027/RE/710270456/1014/BUSINESS

http://www.mel-re.com/founder.htm

Here is the contractor's website. Notice the affiliation he stresses with a couple of different churches. Also notice that there is a link to capital partnering opportunities.....sounds like he forced his subs and vendors into a capital partnering venture.

When someone comes up to me and the first question out of their mouth is "what is you cost per square foot?' I already assume I dont want to do business with them.

Yep, because when building a custom home, there is no way to determine that. Because just one type of material that is spec'd and then changed can blow that price out the window.

I always get a kick out of people wanting an exact price on a vague item!

I always get a kick out of people wanting an exact price on a vague item!

Or the ones that give a set of plans for you to estimate with and then when you get the sealed set of plans to build with it has about 50 more pages than the first one. They dont seem to realize that each of those extra pages will probably add 10s of thousands of dollars to that "estimate".