How Do We Get Subcontractor Liens Removed if the Developer is Gone?

Full Question:

My husband and I built a home in Minn last year. closed on our house May 7 2010. after we moved in we received 3 mechanics lien notices - these are all filed with the county we live in. We paid for our home - the builder walked away with around 7K of our money plus he did not pay the subs. as home buyers do we have any protection? and can we get these liens removed? I appreciate your help! One other point - our builder went out of business and skipped town.
06/03/2011   |   Category: Contractors ยป Construction...   |   State: Minnesota   |   #24959

Answer:

If a mechanic's lien has been filed against your property, you need to consider your options. First, you can wait for the lienholder to file suit against you to enforce the lien. Then, you can raise any defenses to the lien in your answer. If the lienholder does not file suit and the Notice of Lis Pendens within the one-year timeframe, the lien is unenforceable.

If you think the lien was filed without justification, you can also bring an action in court to have the lien removed from your title. This type of lawsuit is called an action to determine “adverse claims” in real estate. An action to determine adverse claims on your property may be necessary if you want to have the validity of a mechanic's lien determined before the one-year deadline. For example, this may be necessary if you want to sell your home before the one year is up. Your private attorney can help you determine whether you need to file an action to determine adverse claims if a mechanic's lien is filed against your property.

Settlement

There are several ways a lien might be settled after an action is begun by the lienholder. You may settle out of court. If this happens, you, the property owner, should make sure that as a condition of settlement, the lienholder removes the Notice of Lis Pendens from the title and files a Satisfaction of Mechanic's Lien form with the county registrar of deeds. If you do not settle out of court, you may receive a judgment by the court. A judgment takes precedence over lien statements and notices of lis pendens. The lien statements and notices of lis pendens are removed from the title to the property when a judgment is issued. In the event the court finds in favor of the lienholder, it may order the sale of the property to satisfy the lien.

Civil Action

If a lienholder fails to complete any of the steps involved, the lienholder may still try to recover his or her claim in an ordinary civil action, that is, the lienholder can sue anyone with whom the lienholder has a contract (usually the general contractor or you, the property owner).

For 120 days after all work is completed, you have the right to withhold from the contractor as much of the contract price as is necessary to pay subcontractors unless the contractor has given you lien waivers signed by the subcontractors. Minnesota statute has no specific provision for the release of a lien, other that the automatic dissolution that occurs if a lien statement is not filed within one hundred twenty (120) days of the completion of work, or if suit to enforce the lien is not brought within one (1) year.
Minnesota law does not have a provision under which a bond may be filed for the purposes of releasing a lien.