# Deadbeat clients that won't pay



## TLP (Jun 17, 2013)

Hi, I have a $6K roof job I did for a homeowner that is telling me she won’t pay to stand in line she is filing bankruptcy. I checked district court, they said since I am an LLC I cannot represent myself and small claims has $4K limit. It is a slam dunk case for me since she signed a contract and has to pay my attorney fees. Wining a judgment s/b no problem collecting it perhaps another story. Her husband owns a heating a cooling business, she is a RE agent with a lot of property she says she is losing since she is going around saying she is by-polar. I know the USA trustee will not allow a CH 7unless she liquidates all assets and I can be there probably last in line, CH 13 I doubt I get much if anything. I checked on mechanic liens, I can only do one for one year for $36. I may be able to peruse fraud criminal charges against her for going around town hiring contractors knowing she is going to file bankruptcy; it is just a matter of my time invested to do all this stinks!

I’m looking into setting up an escrow account for the clients that won’t pay up front to protect myself from dead beats. Most of the time I deal with management companies who act as the escrow agent and hold insurance funds and I get paid. Also and/or thinking I’ll try asking these clients for payment @ 50% complete, then full payment when complete. I can understand some clients concern, it’s been on the news here where contractors come into towns out of nowhere then leave with up-front cash never doing the work. I also have some big competition that TV advertising to tell contractors to leave if they ask for any money up front; I guess they can afford losses or attorneys. I also checked into collection agency seems like the make out better than me. 


I guess the first step in to write a threatening registered letter. 

Any advice or experience appreciated.


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## Chris Johnson (Apr 19, 2007)

Welcome to being in business, sucks EH?

You want to own a company, these are the risks. You do not send a threatening letter, you pay a lawyer to do so. Lets be blunt here, it's 6k, not 60k. Consider it a tax write for bad debt. But at a minimum, you have lien rights, exercise them.

I agree a collection agent will charge you a fair bit, lawyer will not be cheap. The 6k amount is enough to piss you off, but not enough to justify dumping more money into it.

All as you can do is hope and pray the roof leaks like a sieve and you get a call from her...then you can laugh at her. Just a personal make you feel good sorta thing.

Perhaps contact her husband and ask him what the issue is with your work on the matrimonial home, he may not even know what scams she is pulling.


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## mikeswoods (Oct 11, 2008)

Talk t a lawyer---This sounds like theft by deception---if she intended to file bankruptcy before she signed your contract--
Can you prove that?

I'd be hot---but for $6000 I doubt if you will be money ahead after the fight is over---


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## TLHWindows (Jan 5, 2012)

you mind telling us were you are at?


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## EthanB (Sep 28, 2011)

$6K job and you have nothing down? Or was it just the final payment? Still sounds like you need to rework your payment plan.


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## Inner10 (Mar 12, 2009)

EthanB said:


> $6K job and you have nothing down? Or was it just the final payment? Still sounds like you need to rework your payment plan.


Yeah re work it in a way that you get paid instead of screwed.


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## CarpenterSFO (Dec 12, 2012)

If you can easily get a small claims judgment for $4K then do that - a judgment for $4K on a debt of $6K would be a good win. Depending on your state, you may have a fair amount of time (10 years?) to collect. Then, whether you get that judgment or not, be prepared to write it off and figure out how you got into that situation, and how to avoid it in the future.

Edit: Oh, I see, I read again: you can't do small claims because you're an LLC. Ignore that part, then. Write it off and learn from it.


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## jamestrd (Oct 26, 2008)

CarpenterSFO said:


> If you can easily get a small claims judgment for $4K then do that - a judgment for $4K on a debt of $6K would be a good win. Depending on your state, you may have a fair amount of time (10 years?) to collect. Then, whether you get that judgment or not, be prepared to write it off and figure out how you got into that situation, and how to avoid it in the future.
> Edit: Oh, I see, I read again: you can't do small claims because you're an LLC. Ignore that part, then. Write it off and learn from it.


why not? businesses can sue in small claims against customers or other businesses..where does this info come from?


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## Jaws (Dec 20, 2010)

Id drop some dough to make her pay the 6k. But thats me, Im black and white. I hate a deadbeat. They are thieves, even worse really.

It is a sad thing that the majority of people are worth nothing where it counts. Very sad. 

Business wise, learn from it and take the proper measures to help ensure it doesn't happen again.


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## CarpenterSFO (Dec 12, 2012)

Edit: James was correct. Corporations, partnerships, etc., have some different rules (lower claim limits around here), but they may sue in small claims court. Sorry for the confusion, all mine.


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## CarpenterSFO (Dec 12, 2012)

...


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## Subia29 (Feb 18, 2007)

Have someone stand in front of their home or buisness with a sign.
"shame on John and Jane" Let everybody that they are crooks.

People like that know how filed bankruptcy and get away with it.
They have no intention of paying you. 

Look at them straight in the eyes and ask them "How can you sleep at night" How many people have you screwed."

Sorry to here,6k is alot. Choose your clients. Good Luck.


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## TLP (Jun 17, 2013)

Avoid her like a plague. This is my first deadbeat, why I hate dealing with homeowners, but this one had a lot of rental properties. My admin has been working on this so we know what to do in the future. The 6K is all profit and I got 2K of the 6 for a total of 8. Picking clients is like throwing dice; I’m not sure whom I despise more this one or the old lady from hell that is never satisfied I am currently dealing with. Perhaps I should hire a psychologist to detect by-polar PITA old ladies. 

I have a friend that has 30 years’ experience with the same issues in NJ, where a company can go to civil court, next state over PA they can’t. In NJ the limit is $15K for civil then you go to superior. States vary, there are clients out there that do this all the time. 

So we are getting in touch with the sheriff’s office to see about fraud criminal charges, and Kansas Real Estate Commissions to report her RE license. With that info my friends recommends we write a nasty-o-gram. She said often people will pay in fear of going to court. I will cause her some damage somewhere, not sure how yet and yes learn my state along the way. 

We will check some lawers first to see if they will take it, my fear there is she files bankruptcy more loss to me. As stated the risk and time here for 6K is not worth it. I been meaning to check small claims see if they will let me in. As I said, getting the judgement is the easy part, collecting(bankruptcy, etc) another story. I need to decide if 6K profit is worth my time since I know this whole process is going to be time consuming and not fun. I think the time would be served designing ways to prevent it in the future. 

I checked Bank of America and my credit union so far, not much luck on setting up an escrow account. BOA wants a $250K min balance for the cost of being the agent and managing such an account. They did say they had another way I need to call today. All I’m thinking here is an account agent that manages my contract and accounts receivable. My client that does not want to pay up front makes a deposit (based on a payment schedule I provide up front) at the 50%, 100%. At 50% they can look at the work then go to the local bank sign off on 50% then make a payment to the account, the agent gives me my $. If not I don’t continue and loose more. Same @ 100% complete. 

I’ll keep ya all posted.


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## jamestrd (Oct 26, 2008)

TLP said:


> Avoid her like a plague. This is my first deadbeat, why I hate dealing with homeowners, but this one had a lot of rental properties. My admin has been working on this so we know what to do in the future. The 6K is all profit and I got 2K of the 6 for a total of 8. Picking clients is like throwing dice; I’m not sure whom I despise more this one or the old lady from hell that is never satisfied I am currently dealing with. Perhaps I should hire a psychologist to detect by-polar PITA old ladies.
> I have a friend that has 30 years’ experience with the same issues in NJ, where a company can go to civil court, next state over PA they can’t. In NJ the limit is $15K for civil then you go to superior. States vary, there are clients out there that do this all the time.
> So we are getting in touch with the sheriff’s office to see about fraud criminal charges, and Kansas Real Estate Commissions to report her RE license. With that info my friends recommends we write a nasty-o-gram. She said often people will pay in fear of going to court. I will cause her some damage somewhere, not sure how yet and yes learn my state along the way.
> We will check some lawers first to see if they will take it, my fear there is she files bankruptcy more loss to me. As stated the risk and time here for 6K is not worth it. I been meaning to check small claims see if they will let me in. As I said, getting the judgement is the easy part, collecting(bankruptcy, etc) another story. I need to decide if 6K profit is worth my time since I know this whole process is going to be time consuming and not fun. I think the time would be served designing ways to prevent it in the future.
> ...


Dude you're working way toooo hard...find better customers..if they don't make a deposit.you walk..why put all this unnecessary expense and work on yourself and others in your operation?


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## TLP (Jun 17, 2013)

jamestrd said:


> Dude you're working way toooo hard...find better customers..if they don't make a deposit.you walk..why put all this unnecessary expense and work on yourself and others in your operation?


Yeah maybe your right, I'd like to avoid homeowners all together. Problem as I said above, the big fish rehab construction co here is TV advertising telling the public to make contractors walk if they ask for money upfront. I under bid these guys all the time and can't afford to argue on TV. Also, as I said, I am in tornado alley where these contractors come in get a down and bolt. With that said, I can understand them not wanting to put a down. I told a management co two days ago I want a down on a $42k fire restoration job I'd make $20K profit, the owner is refusing to put money down. Have not heard back yet, I think I may have lost this one and the $20K. That is my motivation. However, I think I am going to pass on small home owner jobs now since my bus is growing fast and I don't need the risk.


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## Inner10 (Mar 12, 2009)

Subia29 said:


> Have someone stand in front of their home or buisness with a sign.
> "shame on John and Jane" Let everybody that they are crooks.
> 
> People like that know how filed bankruptcy and get away with it.
> ...


Long time ago my father did a service call for a guy and had a great deal of trouble getting paid. My mother found out where he worked at called them, the first person that answered the phone she asked

"Hello, are you aware of your co-worker Mr. X having serious financial difficulties at the moment because he is having a great deal of trouble settling his account"

Well the word spread around his office and he showed up with a cheque the same day!...boy was he pissed.


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## CarpenterSFO (Dec 12, 2012)

TLP said:


> Yeah maybe your right, I'd like to avoid homeowners all together. Problem as I said above, the big fish rehab construction co here is TV advertising telling the public to make contractors walk if they ask for money upfront. I under bid these guys all the time and can't afford to argue on TV. Also, as I said, I am in tornado alley where these contractors come in get a down and bolt. With that said, I can understand them not wanting to put a down. I told a management co two days ago I want a down on a $42k fire restoration job I'd make $20K profit, the owner is refusing to put money down. Have not heard back yet, I think I may have lost this one and the $20K. That is my motivation. However, I think I am going to pass on small home owner jobs now since my bus is growing fast and I don't need the risk.


Build a referral-based business, so that what some other company says on TV isn't your problem. If you have a list of satisfied customers for your leads to call, they'll give you down payments in order to get your commitment to do their work. 

As far as the 20K profit on the 42K job, maybe you haven't heard back because you bid too high.


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## TLP (Jun 17, 2013)

CarpenterSFO said:


> Build a referral-based business, so that what some other company says on TV isn't your problem. If you have a list of satisfied customers for your leads to call, they'll give you down payments in order to get your commitment to do their work.
> 
> As far as the 20K profit on the 42K job, maybe you haven't heard back because you bid too high.


As far as a referral based business that is what I have with management co's and alot of work. I am trying to expand that client base and homeowners whom I am finding are the biggest headache. The fire job is from my best management co client we have a great track record with. We one the bid it is when we wanted down as we are normally given this owner anyway had an issue. The management co is going up to bat for us having meeting's, etc, we'll see what happens. I will call them soon last ditch effort, see if we can arrange me doing the materials order on my dime with a stipulation that I get paid @ 50%, materials being around the same $6-8K. Nice thing here is the management co is the escrow account trustee, owner pays them they pay me. With homeowners there is no such safeguard so I am looking at creating one for the bigger jobs. After I get an answer from small claims and collecting the floor for these jobs may be $4K material orders since I can take them to small claims.


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## Tinstaafl (Jan 6, 2008)

Why on earth would you buy materials for a job on your own dime? I can see that for a quicky couple-hundred job, but not thousands. Front only the amount of money you can afford to lose if the whole thing goes south for any reason. Once you install the materials, they are "real property" of the client, and you can't repo them.

Doing half the job before receiving any money at all borders on attempted suicide.


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## Calidecks (Nov 19, 2011)

Tinstaafl said:


> Why on earth would you buy materials for a job on your own dime? I can see that for a quicky couple-hundred job, but not thousands. Front only the amount of money you can afford to lose if the whole thing goes south for any reason. Once you install the materials, they are "real property" of the client, and you can't repo them.
> 
> Doing half the job before receiving any money at all borders on attempted suicide.


If my client doesn't pay my lumberyard will lien there home. Thats a service for both of us. However I've owned this business for 12 years and I've always been paid. Usually I've found if a customer isn't paying its because the contractor is not on the up and up. Not always but usually. I'm the guy coming in and fixing there chit so I hear and see it all the time.


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## griz (Nov 26, 2009)

Californiadecks said:


> ...Usually I've found if a customer isn't paying its because the contractor is not on the up and up. Not always but usually. I'm the guy coming in and fixing there chit so I hear and see it all the time.



More truth to this than most will care to admit.....:thumbsup:


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## Tinstaafl (Jan 6, 2008)

Californiadecks said:


> If my client doesn't pay my lumberyard will lien there home.


Ernh? How can your yard place a lien on _your_ client, with you as their customer? They should be coming after you, if you don't pay.

Or do you sidestep that and have your client order the materials direct?


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## Calidecks (Nov 19, 2011)

Tinstaafl said:


> Ernh? How can your yard place a lien on your client, with you as their customer? They should be coming after you, if you don't pay.
> 
> Or do you sidestep that and have your client order the materials direct?


Not at all. My lumberyard simply sends out a 20 day prelim. After I put the materials on my account they take the customers info. Just like a sub. Sometimes I wait to pay the lumberyard just so they send out the prelim so the customer understands why they need to pay.


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## Calidecks (Nov 19, 2011)

Tinstaafl said:


> Ernh? How can your yard place a lien on your client, with you as their customer? They should be coming after you, if you don't pay.
> 
> Or do you sidestep that and have your client order the materials direct?


The prelim reads I'm paraphrasing here: Ganahl Lumber has delivered material to your home on an account if your contractor doesn't pay you can be forced to sell your home to pay for material. It also says this notice is not a reflection of the integrity of your contractor. I almost always pay before the 20 day and they won't send it out. But some customers that I might be a little apprehensive about ill let the notice get sent.


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## Tinstaafl (Jan 6, 2008)

Must be a CA thing. Here, if it's on my account, I'm responsible to pay for it.

First time I've heard of a CA process I'm jealous of. :laughing:


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## Calidecks (Nov 19, 2011)

Tinstaafl said:


> Must be a CA thing. Here, if it's on my account, I'm responsible to pay for it.
> 
> First time I've heard of a CA process I'm jealous of. :laughing:


Its tough to find anything to like here.


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## steex (Feb 19, 2013)

That would be embarrassing as heck if you didn't know it was coming.


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## Katatonic (Jun 16, 2013)

Someone needs to create a reverse Angie's list where we can rate clients.


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## TLP (Jun 17, 2013)

Tinstaafl said:


> Why on earth would you buy materials for a job on your own dime? I can see that for a quicky couple-hundred job, but not thousands. Front only the amount of money you can afford to lose if the whole thing goes south for any reason. Once you install the materials, they are "real property" of the client, and you can't repo them.
> 
> Doing half the job before receiving any money at all borders on attempted suicide.


How about for the same reason I just spent $500 an Eagle View report for a bid competition not knowing I got the job but can make $70K if I get it, or all the time I spend estimating jobs just to make large profits or not. Most of the time we get paid, can’t win them all! Most that have had large success in business had to take risk to get there and they didn’t always win. 

We sign the fire job today. We are fronting the money for 1. 5 weeks with stipulations in place that three parties (two management businesses, one homeowner) signs the contract and that the entire agreed amount is placed in an escrow account. That is how we mitigate risk, and collect a $20K profit check soon. Look, no one out here knows enough about all the markets in USA and the local client base to give advice on the do’s and don’ts of doing business. You must be or think you are a Fortune 500 construction company if you do. 

Checked into small claims, corporations can represent themselves. Just need to find out how to collect, in some states the sheriff’s office helps. Might just end up taking to small claims for 4, eat $2K.


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## TLP (Jun 17, 2013)

Californiadecks said:


> The prelim reads I'm paraphrasing here: Ganahl Lumber has delivered material to your home on an account if your contractor doesn't pay you can be forced to sell your home to pay for material. It also says this notice is not a reflection of the integrity of your contractor. I almost always pay before the 20 day and they won't send it out. But some customers that I might be a little apprehensive about ill let the notice get sent.


I think you are misinformed, federal and state laws do not "make" someone sell their home. A creditor can place a lien on a home, and be in line with other lien holders(mortgage co's, etc)...the 1st mortgage gets paid first, 2nd next unless the first lawyer petitions the 2nd, mechanic liens from lumber yards and contractors get paid last and only last a certain length of time depending on state law. If the home is not foreclosed on from the primary lender or sold at will by the owner, the mechanics lien does not get paid and can not be reissued.


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## BamBamm5144 (Jul 12, 2008)

Same thing here. I put materials on credit. If they don't pay me, supplier places lien.


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## CarpenterSFO (Dec 12, 2012)

Tinstaafl said:


> Must be a CA thing. Here, if it's on my account, I'm responsible to pay for it.
> 
> First time I've heard of a CA process I'm jealous of. :laughing:


California requires a half page or so of lien-related language in a remodeling contract. Some suppliers and subs, not all, send out 20-day prelims as a general practice when they start a job or start supplying for a job - they lose their lien rights if they don't. I make sure that customers know about it and don't get freaked out if they get one. It's not a big deal.

The prelim practice is meant to help the homeowner, also. It lets them know that through their general contractor they (the homeowner) are becoming a creditor to subs and suppliers, and to keep an eye on whether the subs and suppliers are getting paid. One of the first indications for homeowners that the general has money problems is that the subs come knocking on the door, asking to get paid.

Some generals won't let their subs send prelims.


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## CarpenterSFO (Dec 12, 2012)

TLP said:


> I think you are misinformed, federal and state laws do not "make" someone sell their home. A creditor can place a lien on a home, and be in line with other lien holders(mortgage co's, etc)...the 1st mortgage gets paid first, 2nd next unless the first lawyer petitions the 2nd, mechanic liens from lumber yards and contractors get paid last and only last a certain length of time depending on state law. If the home is not foreclosed on from the primary lender or sold at will by the owner, the mechanics lien does not get paid and can not be reissued.


Laws vary from state to state. California has a strong mechanics lien provision compared to other states. Here's the straight dope, straight from the CSLB:

"A lien foreclosure action is a lawsuit to foreclose the mechanics lien. The lien claimant must file a lien foreclosure action within 90 days of the date that he or she recorded the mechanics lien. Often a lien claimant with a valid claim will fail to follow through, making the lien invalid."


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## TLHWindows (Jan 5, 2012)

I don't believe they send a prelim here, but in FL we do have a law that if a supplier delivers material to a job site and the contractor doesn't pay then the supplier can lien the house. 

I thought most states had that in place.


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## Chris Johnson (Apr 19, 2007)

Also in California (at least from my memory) is yes a preliminary notice goes out, and when you apply for a draw or payment you also get a statement from the suppliers who place a prelim notice stating the amount owed and upon receiving payment, satisfying the account no lien is placed. On the larger projects a joint check is issued, I sign it, send it to the supplier and everything is covered.


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## TxElectrician (May 21, 2008)

In Texas pretty much anyone due money from a project can file a lien, from the supplier, contractor, sub or laborer. 

On larger jobs I set up job account with the supplier and give them all the info they need to be able to file. If I'm not paid, I don't pay the supplier and they send the prelims. Doing it this way keeps my house account current, and open. I have a good enough relationship with the suppliers that they know they will get their money. I've only had to have them send notices a couple of times.


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## Calidecks (Nov 19, 2011)

CarpenterSFO said:


> California requires a half page or so of lien-related language in a remodeling contract. Some suppliers and subs, not all, send out 20-day prelims as a general practice when they start a job or start supplying for a job - they lose their lien rights if they don't. I make sure that customers know about it and don't get freaked out if they get one. It's not a big deal.
> 
> The prelim practice is meant to help the homeowner, also. It lets them know that through their general contractor they (the homeowner) are becoming a creditor to subs and suppliers, and to keep an eye on whether the subs and suppliers are getting paid. One of the first indications for homeowners that the general has money problems is that the subs come knocking on the door, asking to get paid.
> 
> Some generals won't let their subs send prelims.


The only way a general can stop a sub from a prelim is to pay him before the 20 day. 95% of the time I pay my yard within the 20 day. However there are some customers that scare me so to get a message across to them I will go to my lumberyard and tell them to prelim this customer. It's a safety net for both of us. Usually it's me being a little paranoid and I have yet to be stiffed from anybody. I'm not a hard man to track down, I leave happy clients everywhere I go. :thumbsup:


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## Calidecks (Nov 19, 2011)

Also here in Cali we have to file a $12,500.00 bond with the board. This bond is to cover damages caused by contractor laws that may get broken. It's not to cover a homeowner for shotty work. This is why it's against the law to advertise that you are bonded, because it could lead a HO to think they have another level of protection that they they really don't.


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## TLP (Jun 17, 2013)

CarpenterSFO said:


> Laws vary from state to state. California has a strong mechanics lien provision compared to other states. Here's the straight dope, straight from the CSLB:
> 
> "A lien foreclosure action is a lawsuit to foreclose the mechanics lien. The lien claimant must file a lien foreclosure action within 90 days of the date that he or she recorded the mechanics lien. Often a lien claimant with a valid claim will fail to follow through, making the lien invalid."


Mechanic liens a pretty worthless, I attend the foreclosure hearing’s here at our district court where attorney’s/bankers from first lenders have petitioned 2nd if there is one, set a min bid (usually what is owed the first). I also know some Cali investors, same deal. No one ever bids above what is owed the first at the hearing, $6-20K 2nd/mechanic lien holders won’t waste their time battling the first position. Law requires a county newspaper make the hearing public record for 90 days, after the hearing the home owner has a redemption right, period of time (up to a year), but most move out in 3-6 months since they can’t make good on the loan, have no equity, and have trashed the place. RE agents/investors are there like me looking for deals, some like sharks looking for equity, go to the homeowner and buy their redemption rights. 

If you hold a mechanics lien you can show to the hearing and place a bid to pay the mortgages since make no mistake they will be represented there by their attorney, then sell to try and get your lien paid, unlikely. If you do you are given a court title, not a warranty or clear title, until the redemption period is over or you buy it. Even after you "own" the property the court or the bank does not guarantee clear title. 

You as a mechanic lien holder can start the foreclosure process if the statute of limitations has not passed(here 1 year), sure, but you can bet the mortgage companies are not going to sit back and let it be sold for pennies on the dollar or small chump change of a mechanics lien. By the time the first gets paid there is no equity, most cases the first is taking a loss. A supplier would have to be pretty stupid to put themselves in that position, I got a feeling there is more to this story in these states.


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## TLP (Jun 17, 2013)

Californiadecks said:


> Also here in Cali we have to file a $12,500.00 bond with the board. This bond is to cover damages caused by contractor laws that may get broken. It's not to cover a homeowner for shotty work. This is why it's against the law to advertise that you are bonded, because it could lead a HO to think they have another level of protection that they they really don't.


I believe you are talking about a surety bond.....

A surety bond or surety is a promise to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract. The surety bond protects the obligee against losses resulting from the principal's failure to meet the obligation.

Some state jobs here require contractors to have these, they are another layer of protection for them. We have them issued per job upon request and can advertise we are bonded. The rate we pay depends on what we are doing.


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## Calidecks (Nov 19, 2011)

A contractor has an obligation not to commit any violation of contractor license law that is grounds for disciplinary action against the license. If the contractor does not comply with the conditions of the bond, a claim can be filed with the surety company.

Claims against a surety company may be filed by homeowners, any person damaged by a willful and deliberate violation of a construction contract, employees damaged by the contractor's failure to pay wages, or an express fund damaged as a result of the contractor's failure to pay fringe benefits for eligible employees. (A court case has held the express trust fund provision superceded by federal law.)


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## TLP (Jun 17, 2013)

Californiadecks said:


> Also here in Cali we have to file a $12,500.00 bond with the board. This bond is to cover damages caused by contractor laws that may get broken. It's not to cover a homeowner for shotty work. This is why it's against the law to advertise that you are bonded, because it could lead a HO to think they have another level of protection that they they really don't.


Who is the beneficiary of the policy if damages are incurred? 



Californiadecks said:


> A contractor has an obligation not to commit any violation of contractor license law that is grounds for disciplinary action against the license. If the contractor does not comply with the conditions of the bond, a claim can be filed with the surety company.
> Claims against a surety company may be filed by homeowners, any person damaged by a willful and deliberate violation of a construction contract, employees damaged by the contractor's failure to pay wages, or an express fund damaged as a result of the contractor's failure to pay fringe benefits for eligible employees. (A court case has held the express trust fund provision superceded by federal law.)


If a contractor causes “damages” it is usually to a client, homeowner, lumber yard, etc. Happens all the time, some come into disaster relief areas collect a down then skip town, or, do bad work, or don’t complete the job. So my interpretation above is that there will be disciplinary action against the license, and their clients/employees can file a claim against the bond, which includes home owners. The exemptions vary in these policies so clients need to get a copy of the policy. Not sure where you got this, but claims are extended to the contractors employees if they have any. Sounds like some Cali case law was upheld to include the contractors/employees fringe benefit account ”express trust fund” that previous Federal law did not allow. 

If you look at most general liability, workers comp, surety bond policies, SP & corporate law, etc, there is no protection for the fraudulent contractor. What this thread has been about is the fraudulent client. 

You contractors that think liability is somehow shifted to a lumber yard by your credit line with them and relationship with clients, I think will be in for a big surprise should the lumber yard loose on the lien foreclosure and pursue you, especially if you installed their materials. The lumber yard and/or their insurance co's have rights under subrogation laws to pursue all parties involved, you might want to check with an attorney, not listen to your lumber yard or think they know law.


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## Calidecks (Nov 19, 2011)

Those quotes are from the California Contractors License Board website.


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## Calidecks (Nov 19, 2011)

Here's the exact excerpt from the CSLB 

Don't advertise about bonding
Contractors are forbidden by law to advertise the fact that they are bonded. It could lead the public to believe there is a higher level of protection than might be the case.


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## Calidecks (Nov 19, 2011)

TLP said:


> Who is the beneficiary of the policy if damages are incurred?
> 
> If a contractor causes “damages” it is usually to a client, homeowner, lumber yard, etc. Happens all the time, some come into disaster relief areas collect a down then skip town, or, do bad work, or don’t complete the job. So my interpretation above is that there will be disciplinary action against the license, and their clients/employees can file a claim against the bond, which includes home owners. The exemptions vary in these policies so clients need to get a copy of the policy. Not sure where you got this, but claims are extended to the contractors employees if they have any. Sounds like some Cali case law was upheld to include the contractors/employees fringe benefit account ”express trust fund” that previous Federal law did not allow.
> 
> ...


Also I would never use my lumberyard to collect via a lien. However the letter they send to the HO has some teeth to not let it go that far. It's the letter that works wonders.


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## Calidecks (Nov 19, 2011)

TLP said:


> Who is the beneficiary of the policy if damages are incurred?
> 
> If a contractor causes “damages” it is usually to a client, homeowner, lumber yard, etc. Happens all the time, some come into disaster relief areas collect a down then skip town, or, do bad work, or don’t complete the job. So my interpretation above is that there will be disciplinary action against the license, and their clients/employees can file a claim against the bond, which includes home owners. The exemptions vary in these policies so clients need to get a copy of the policy. Not sure where you got this, but claims are extended to the contractors employees if they have any. Sounds like some Cali case law was upheld to include the contractors/employees fringe benefit account ”express trust fund” that previous Federal law did not allow.
> 
> ...


Also if the HO doesn't like the work but no laws were broken they can't collect from the bond. That is a civil case. A HO can only collect if CSLB laws have been broken and the HO was damaged as a result of this law being broken.


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## Calidecks (Nov 19, 2011)

I might add its not against the law to do chitty work.


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## CarpenterSFO (Dec 12, 2012)

Californiadecks said:


> The only way a general can stop a sub from a prelim is to pay him before the 20 day. 95% of the time I pay my yard within the 20 day. However there are some customers that scare me so to get a message across to them I will go to my lumberyard and tell them to prelim this customer. It's a safety net for both of us. Usually it's me being a little paranoid and I have yet to be stiffed from anybody. I'm not a hard man to track down, I leave happy clients everywhere I go. :thumbsup:


:thumbsup:A prelim notice lets the customer know you're playing for real. It's an eye opener.


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## TLP (Jun 17, 2013)

http://www.cslb.ca.gov/generalinfor...trybulletins2005/industrybulletin20050307.asp

I found it. I actually agree more states should have this law. We get alot around here that advertise "bonded" to help their position in the biding war. It is misleading since as I said above it really depends of the underwriter, policy, and exemptions. It is like most things you get what you pay for, and if a contractor has some cheap worthless policy they are using to get work it is bordering fraud. I bet that happens alot in states like Cali since the masses are higher. However, the policy should cover the homeowner, client.


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## CarpenterSFO (Dec 12, 2012)

TLP said:


> Mechanic liens are pretty worthless,....


The goal of filing a mechanic's lien isn't only to get in line with the other lien holders - it's to pressure the owner into payment. A key point in California is that you can file for foreclosure on a mechanic's lien in the absence of any other foreclosure action. California's lien law puts lien claims in line in order of date of claim, so it's possible to be in front of some lenders.

This is all abstract for me; I've never had to do it, and I hope not to.


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## Calidecks (Nov 19, 2011)

CarpenterSFO said:


> The goal of filing a mechanic's lien isn't only to get in line with the other lien holders - it's to pressure the owner into payment. A key point in California is that you can file for foreclosure on a mechanic's lien in the absence of any other foreclosure action. California's lien law puts lien claims in line in order of date of claim, so it's possible to be in front of some lenders.
> 
> This is all abstract for me; I've never had to do it, and I hope not to.


Same here Bob, it's all theory for me, I have yet to have to go there. I'm very proactive about the money it's almost impossible to stiff me. I emphasize the "almost".


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## TLP (Jun 17, 2013)

CarpenterSFO said:


> The goal of filing a mechanic's lien isn't only to get in line with the other lien holders - it's to pressure the owner into payment. A key point in California is that you can file for foreclosure on a mechanic's lien in the absence of any other foreclosure action. California's lien law puts lien claims in line in order of date of claim, so it's possible to be in front of some lenders.
> 
> This is all abstract for me; I've never had to do it, and I hope not to.


The order and dates foreclosure occur in doesn't matter, what matters is whom shows up to the hearing. As I said all parties with a vested interest are going to show and are petition to, especially higher creditors. The 2nd, 3rd, mechanic lien position creditors normally don't want the home back or own it on their books(REO) for the price they had to out bid the first mortgage holder, and the property condition is usually bad. 

It be great if you could buy a house for what it owed a mechanics lien with a clear title. I can tell you it don't happen, especially in Cali, I for one be all over it if it did :no:


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## CarpenterSFO (Dec 12, 2012)

Californiadecks said:


> I might add its not against the law to do chitty work.


:laughing::laughing::laughing:
And it shouldn't be, either.


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## Eaglei (Aug 1, 2012)

Enough already with the legal mumbo jumbo just go back and start removing what is yours .


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## Jaws (Dec 20, 2010)

Funny story, loosely related. 

Two of my subs told me this on Friday.

One of the local builders who is known for being an arrogant douche was at the site handing out checks. The framer said his check was light by 5k.....

The builder said he had some punch list to do and he was holding it. The house is only 2800 sq ft, 5k is probably close to or more than a third of the job. 

The framer said that it was BS. Hold 1k, make your list and I will be back to complete. The builder told him to piss off, he is the GC, his rules. (Highly doubt there was a contract). 

The framer, no exaggeration, is like 6'4" 285. Plaued D1 defensive end for a year, used to be a body builder. The GC is like 6'0" 175.... and not really a 175 you would be worried about. The framer, from my little time around him is a laid back, cool headed guy. Not an overly aggressive guy. The builder is yelling at him though....

He told the GC, " look, bro. You write me a check for 4k, and make me a punch list. Its simple. You arent god.." 

The builder yelled more. Ths framer said " you write the check or im going hit you in the head untill you change your mind...." 

The GC actually told him he was going to whip his ass. The framer starts around the truck, the gc starts yelling at him and backing away. He trips backwards. Then he said something like lets talk about this. 

The framer said there is nothing to discuss. Get my check. The builder told him to follow him to his office and LIMPED back to his pick up. 

I imagine that dude is feeling pretty dumb right now. Lol.


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## GO Remodeling (Apr 5, 2005)

TLP, 

Has she filed for bankruptcy or just threatening? Is she sole owner or joint ownership? Can you collect from another owner?

If she purposely has mislead you then she should be not be a licensed realtor. Her actions are criminal and she should have her license revoked. That would be to your advantage to recover your funds.


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