Building Tip

[Yellow Hammer]

Tip for the day. Most people will interview a builder, go to a couple of projects that they have done, maybe even talk to a past customer, but one of the most important factors in hiring a builder to build your home is quite simply do they pay their bills and do they pay them on time. Ask your builder this question, even better ask them to supply you with their vendor/sub contractor account list and call them yourself, get their D&B number. Right now is a dangerous time for anyone building a custom home in this market, because there are so many builders that are robbing Peter to pay Paul from one job to the next and are hanging on by a very thin thread, I would not want to be the last one holding the bag when the inevitable happens to anyone that runs their business in this manner. I have spoken with 4 people this year that have showed up at the closing table to find that there is a materialmens lien on their property that has to be satisfied prior to closing.

 

[seacrestkristi]

OMG Grayt idea! Thanks for the tip Yellow Hammer.

 

[Bob]

those liens are in effect for 1 year

 

[GVM]

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.

 

[seaside2]

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.

 

[Will B]

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...

 

[Landlocked]

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...

 

[Pirate]

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.

 

[seaside2]

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.

 

[slandmarks]

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.