Q: I am in the process of building a home and was just served with notice that an electrical company has recorded a lien against my property. I have never heard of this company, and I have made all payments to my general contractor. How can this lien be placed on my property and what do I do about it?
A: The electrical company is likely a subcontractor hired by your general contractor to do the electrical work on your home. Under Idaho law, your general contractor is authorized to act as your agent in hiring subcontractors to furnish materials and/or perform services in connection with the property development. Even if you have made all necessary payments to your general contractor, it is possible that the general contractor has not paid a subcontractor. If that is the case, Idaho law affords the right to the unpaid subcontractor to place a lien on your property to ensure payment.
A recorded lien on your property creates a cloud on your title making it almost impossible to refinance or sell. Further, where you are in the building process, you may be paying for the development with a temporary construction loan that will need to be converted to a home loan once construction is completed. A recorded lien can prevent you from obtaining a home loan to repay the construction loan, potentially causing significant harm in additional fees and interest.
Consequently, you will want to have the lien removed as quickly as possible. At the same time, you do not want to double pay by paying a subcontractor when you have already paid your general contractor. You should carefully review the contract you entered with the general contractor. There should hopefully be a provision requiring the general contractor to ensure the property remains free of any liens during the construction process. If so, your general contractor has breached the agreement, and you should immediately notify the contractor of the breach and your intent to enforce the contract.
In general, it is important for contracts between a homeowner and general contractor to contain a provision requiring that the general contractor keep the property lien free. These contracts should also include a detailed construction schedule, including information on subcontractors and payment schedules during the construction process. This will assist you in reducing the risk that a lien will be recorded against your property. When selecting a general contractor, you should do your research to verify the contractor is not in substantial debt and has good relationships with subcontractors. After a lien has been recorded, speaking with a local attorney becomes essential to determine what recourse, if any, you have for removing a lien from your property.