AMA - Mechanics Liens

Today’s question is actually two listener questions, both of whom have described very similar situations. 

JR got plat approval and paid a contractor called straight edge for the horizontal development.  That work consists of the road paving, and the infrastructure that is buried in the ground. Straight edge went bankrupt and never paid the paving bill.  So the Paving company files liens on all lots that aren’t owned by home owners.  That’s a total of building 20 lots at $6500 a lot. The total  paving bill was $130,000.  Fortunately JR is eating the loss and reimbursing the cost to the paving company.  At the end of the day, it matters the people you’re doing business with. What should JR have done differently? 

The second question comes from Mark who had a very similar situation involving a contractor whose business partner disappeared and emptied the company’s bank account. The contractor had been paid for steel and concrete work, but the subcontractors were not paid. The original contractor was forced out of business. The subcontractors wanted to be paid and put a lien on the property. Mark now faced the prospect of paying twice for the same scope of work. Not only that, but the original contractor had low bid the job in order to get the business. After interviewing several contractors to complete the construction, it was clear that the project could not be completed for anywhere near the original construction quote. How could Mark have prevented this from happening? 

These are both excellent questions. The very fact that we have virtually the same question being asked twice within a relatively short time period suggests that this is a shockingly common occurrence.