Five Things
Every Homeowner
Should
Know About Construction Liens
 |
| CCB
website has information and forms for both homeowners and contractors. |
By Jonathan M.
Norling
Whether you are
undertaking a large remodeling project or simply hiring a contractor
to paint your house, you need to be aware of a powerful tool contractors
in Oregon (as well as most other states) hold that allows them to
get paid for their services: the ominous-sounding “Construction
Lien.”
Under Oregon law,
licensed contractors may place a lien on any property where they provide
either labor or services. At the very least, the filing of a lien
can be a headache resulting in stress and possibly attorney fees;
at worst, a lien can lead to the foreclosure of your house and the
loss of that beautiful new kitchen that perhaps wasn’t quite
paid for.
Here are five
things every homeowner should know about construction liens, including
how to avoid being hit with one, and, if you are in the unfortunate
circumstance of having a construction lien placed on your property,
how to deal with it.
What a Lien
Is
In its simplest form, a lien is a legal document filed with the county
clerk which, if properly filed and recorded, gives the holder of the
lien an interest in a piece of property. In the most severe situations,
a lien holder can force the sale of the property in order to be paid.
Just as a mortgage holder can force a foreclosure sale if you do not
pay your mortgage, a contractor who has recorded a lien, i.e., filed
it with the county clerk, can force the sale of your house as a means
of securing payment for his or her services.
Every Contractor
Has a Right
to a Lien
Oregon law gives every licensed contractor, including those who only
supply (or even rent) equipment on a job, the right to claim a lien.
While it is reasonable to assume that the contractor you hire directly
has a right to claim a lien if he or she does not get paid, most people
don’t realize that the subcontractors hired by that contractor
may also have a right to a lien—even if the contractor is paid
in full, and even if the subs have never met the homeowners. There
are oft-recounted horror stories detailing how homeowners paid their
“contractor” in full, only to be hit with liens from that
person’s subs! A less than scrupulous contractor may leave you
holding the bag, instead choosing to dart off to Mexico rather than
pay the people he hired. In turn, these hardworking folks resort to
the filing of construction liens in order to get the money they are
owed.
You Have Rights
Fortunately, contractors are required to give you notice of their
right to claim a lien, which at least makes you aware of the potential
problems that may ensue if you or your contractor does not ensure
that everyone working on a job gets paid. While the details of the
notice requirements in Oregon’s lien law are complicated, here’s
the gist of it: Subcontractors who do not deal with you directly must
give you, the owner of a residential property, a “Notice of Right
to Lien,” in order to have the ability to claim a lien. This
notice must be sent certified mail, and strict time limits apply.
While contractors who deal with you directly do not have to provide
this formal notice, they must provide an “Information Notice
to Owner about Construction Liens” if the amount of the contract
is for more than $1,000.
Last, any contractor
bidding on a residential job must provide potential customers with
a “Consumer Notification Form” developed by the Oregon Construction
Contractors Board (CCB). The failure to provide these notices may
result in the loss of lien rights, so it is in the contractor’s
best interests to comply. This in turn makes it less likely that you
will end up losing your house as the result of a construction lien.
Don’t
Panic
Needless to say, it is always stressful receiving certified mail,
especially mail telling you that someone has a right to take away
your house. Bear in mind that the filing of a lien and the “perfection”
of that lien (a legal term for following the procedure required to
turn that piece of paper into a legitimate interest in your house)
is an extremely complicated process that must be done with care and
precision, and a competent attorney may likely find ways in which
the lien is invalid. Also, don’t forget that in almost all cases,
the person filing a lien simply wants to get paid and has no interest
in actually forcing the sale of your house. Indeed, the law recognizes
this, and allows homeowners to post a bond that will be used to pay
the lien holder. While panicking serves no useful purpose, receiving
a Notice of Right to Lien or even the information sheet about construction
liens should serve as a wake-up call and ideally should be enough
to force you to learn more about your rights under the law.
Protect Yourself
Finally, it pays to protect yourself. The best piece of advice is
to have good communication with your contractor. If you receive a
Notice of a Right to a Lien from his or her subs, talk directly to
him or her to see what the contractor’s arrangement is with those
subs.
You can also make
any check out jointly to both the contractor and the subcontractor,
or you can have your contractor agree to obtain waivers of lien rights
from the subs. In any event, there are ample ways to avoid having
to pay for a job twice. Hands down, the best resource regarding construction
liens in Oregon is the CCB website www.ccb.state.or.us,
which has information and forms for both homeowners and contractors.
When it comes
to construction liens, ignorance is not bliss; rather, it may lead
to the loss of your house. Therefore, it pays to know about the law
and your rights under it so you can protect yourself before it’s
too late.
Jonathan Norling
is a partner in the Portland law firm of Nelson Lovinger Norling Kaufmann
LLP, where he specializes in construction and business matters as
well as litigation. |
