OK, this is a first for me! I purchased a clear title foreclosure at the June 2nd sale. Yesterday I was researching some info and stumbled across a Mechanics Lein filed on the previous owner and the property I now own with a file date of July 17th. Which is obviuosly after my purchase back in June. I don’t believe it legally holds water but thought I would ask if it possably does. Does it?
Is it within 90 days of when the work was done? If so, you could have a problem. Usually, a seller has to declare prior to close whether any work has been done on the property which remains unpaid. Attorneys and lenders usually protect the buyer against such injustices, yet if you’re representing yourself and it’s a cash deal, you might just be liable for this unresolved “cloud” on the title.
Once thing to check out is when the work was done, and then check your individual state’s laws on mechanics liens.
If I understand the original posting you bought this from a foreclosure sale or auction!
The liens do not automatically remove just because it is foreclosed on, a contractor has a period of time to file a lien on the property, it varies state by state.
This is why I tell investors interested in un-finished new homes or new properties sitting uncompleted as there is a period a contractor can pop up and file against the property for unpaid services.
The lien is the properties responsibility not the previous owner, although a property buyer can pay the lien, clear title and go after the original owner but if it was a foreclosure sale or foreclosure gone to auction you have no recourse against the original owner by law.
If this is your first lien, be happy and if your going to continue to invest you will most certainly run into one again!
Find out the details, discover if it is legitimate and negotiate a settlement and be done with it. Unless it’s huge a settlement is much cheaper than a bunch of legal fees and then being forced to settle.
Thanks guys! As it turns out I read the statutes and you are correct. The lien had a work completion date of may with a payment due of June 1st. The July 17 file date is well within the 90 day limit. So the lesson is - a clear title purchase at the auction may not have a clear title after all!!! :banghead