CA Homeowners Sued For Builders' Debts-Bankrupt Builders Send Contractors After Homeowners For Costs

[Kadie]

Feb 25, 2008 6:37 pm US/Pacific
Local Homeowners Sued For Builders' Debts

Bankrupt Builders Send Contractors After Homeowners For Costs
California Department Of Insurance


Koula Gianulias SACRAMENTO (CBS13) ― In a new twist on the housing crisis, homeowners are being sued by landscapers and contractors after the property builders go bankrupt. If features like fountains and concrete foundations have not been paid for, the contractors are increasingly going after the homeowners for the balance.

The Petree family paid $450,000 for their Dunmore home right before the builder went bankrupt.

"Within 24 hours of closing escrow, we had four liens on our property," Kathleen Petree said. "Within 30 days, we had 17, and last I checked, we have 28 liens on our property."

They were also slapped with three lawsuits, all from contractors who apparently got stiffed by Dunmore.

"The landscapers, the people that put in windows, the deck, the doorways, the concrete guys," are just a few of the workers seeking payment from the homeowners. Kathleen feels for the contractors that didn't get paid, but she doesn't think they should go after the homeowners.

more...
http://cbs13.com/local/lien.homeowners.contractors.2.662615.html

[DS1]

1. That's wrong, imo

[pinto]

2. Unfamiliar territory for me, but I don't see how this could fly?

Homeowners bought in good faith, I assume, and the builder went under.

I think contractors ought to have recourse, but why not go after builders' financiers, not the end customer (the homeowner)?

[stellanoir]

3. what a mess

[Donnachaidh]

4. every single one of those liens should be thrown out of court.

If those contractors were DUMB enough to complete work without payment -- tough shit. The homeowners ALREADY paid for the improvements. The one who needs to be sued is the BUILDER.

[elizfeelinggreat]

6. dumb? that's a strong word

I doubt you can work for the larger building companies and get paid in a timely manner, never mind before the work is completed. Dunmore doesn't sound like a company that cuts checks to individual contractors on the job site as each house nears completion.

The builder is at fault but the contractors probably will only get some recognition of their dilemma by doing what they have done (I don't agree it's fair or that it will work).

[Donnachaidh]

19. sorry - this problem has been coming for quite some time

MY DH works for a company that had extended credit to builders - and it cost them a whopping 80% of their workforce, when the builders and contractors walked AWAY from their debt. They saw it coming and did nothing to call in the debts, and kept extending credit.


DUMB is totally appropriate. No one woke up and said EEK! the housing market is doomed. So try to hoodwink the owners into paying twice just because the contractors worked on *faith*? Because they KNOW the builders will get away with not paying them. And those same contractors will probably walk away from their own debts, just like the builders.

So it's basically go after the guy who is blameless in the deal? :puke:

[elizfeelinggreat]

21. I don't understand ...

whose workforce are you talking about?

I thought I said quite clearly that I didn't think it was fair to the homeowners but that I didn't see many other ways for the contractors to get their problem noticed.

I was not in any way saying I think the homeowners should be responsible for the payment of those liens, I was simply pointing out that your statement the contractors shouldn't have completed their jobs without full payment wasn't realistic when working with a large building company. (I had looked up this builder's site and they are not one-house-at-a-time builders that a sub would have that kind of contract with.)

I suppose I need more coffee because I don't really understand WHICH entity in this scenario you think should be left holding the bag?

[shain from kane]

5. Look under mechanic's lien.

The title company and the lawyer at the purchase should have been aware of any liens, and informed the buyers. If they did not discover and disclose them, they can be sued under errors and omissions.



http://en.wikipedia.org/wiki/Mechanic's_lien

[dysfunctional press]

7. the liens probably weren't there at closing time.

once the builder went bankrupt, the contractors went after the homeowner.

[Kadie]

8. She blames the title co.

the next paragraph in the article...

snip...
She's blaming Dunmore and her title company for getting her into this mess. "There is no way anyone can convince me that Stewart Title had no idea that this was going to happen."

[Gormy Cuss]

22. It's one of the reasons we buy title insurance -- to protect against old debts on the property.

The title company took the risk and if the mechanic's liens are lawful, the title insurance should reimburse the homeowner up to the limit of the policy value, IIRC.

Mechanic's liens are one of those nasty little surprises for homeowners who hire the wrong contractor. Even the contractors with excellent reputations can stop paying their suppliers and subcontractors without warning.

[msongs]

9. all liens are fraud unless the person being "liened" was part of original deal - criminal IMO nt

[Bennyboy]

10. I know the family of the builders and have done work on these projects.

What is not said in the article is this: Dunmore Homes, run into the ground by a Patriarch, was taken over by the sons (guys I went to school with and grew up with the Sac housing market). They filed bankruptcy a couple of months ago. As part of the whole deal, Sid Dunmore (the patriarch) recieved millions of dollars. Free and clear.

The bankruptcy forgave all the debts belonging to Dunmore Homes. So where d the contrators get the money. the have to file leins against the property. that is the law. BTW< this is nothing new, it happend to me everytime there has been a housing slowdown....And I felt bad about filing against the homebuyers but you have to protect yourself or you are screwed.

[ProfessorGAC]

11. Seems To Be Playing Both Ends Against The Middle

You assume no risk for working with a builder on shaky financial ground, so you place a lien on a property against people who have already paid for the work.

So, you think it's ok to eliminate your business risks by forcing people to pay for the same work twice?

That's not just illogical; it's unjust.
The Professor

[elizfeelinggreat]

12. wow, talk about unjust

"As part of the whole deal, Sid Dunmore (the patriarch) recieved millions of dollars. Free and clear."

Sheesh.

[ProfessorGAC]

14. That's A Non Sequitur

That has nothing to do with anything i said. I'm not defending the builder. I'm defending the buyers against the notion that they should be responsible to pay, again, for something for which they've already paid. Being asked to pay double because of someone else's financial shennigans is, yes, unjust.

The fact that Denmore ran away with a big pile of money is not the buyers' fault.
The Professor

[elizfeelinggreat]

15. I think you misunderstood me

and I probably didn't make myself clear enough. I was trying to highlight/reinforce what you called the builder's shenanigans.

I don't disagree with you at all.

[ProfessorGAC]

16. Sorry

Now i get it. I had a brain cramp and misunderstood your post. I thought you were defending the notion of getting the buyers to double pay.

My fault!
GAC

[YankmeCrankme]

13. Originally, I thought BS...but thinking about it the case may be different than I thought

How could they file a lien against someone who bought a home that has nothing to do with the construction business...unless they bought it from Dunmore Homes itself. I'm guessing that Dunmore Homes finances the buying of the property that they own and aren't just a contractor hired to build the homes for a property development company.

If Dunmore Homes holds the mortgage and still owner of the property then the buyers are paying them and the lien would be to make sure any money collected would be used to pay off creditors.

Or am I reasoning this wrong?

[mainegreen]

17. So if Ford didn't pay a parts company for transmissions, could that company go after car owners?

Doubtful.

How is this different? I'm having a real hard time seeing the difference.

[Bennyboy]

18. You don't file liens against cars or manufacturers....

That is the difference. The reason the contractors filed the liens is to cover their ass. They know it is worng and unlikely they will get anything out of it, but it will require some type of action.

[mainegreen]

20. You can put a lien on a car.

I'm still confused though; if the odds are low of financial recovery, what do you gain?
Is this a step that must be taken to recoup against insurance or to file as a loss on taxes?
:shrug:

[Bennyboy]

23. Not the same type of liens though.....

And yes it is something you have to do.....You have to take every step available to recover your money.

[ProfessorGAC]

24. Sorry, But That's Wrong

I'm on the board of a bank, and it is not necessary to take punitive action against people who don't actually owe you money to show that you've done due dilligence at recovery.

What you're suggesting is simply untrue.

For a second cite, try looking in Mann & Roberts Contract Law under the section on Statute of Frauds.
The Professor

[Bennyboy]

26. You are probably right.....

really it has been while and I did not handle the nuts and bolts when my co did this.

[Bennyboy]

25. The story of Dunmore Homes bankruptcy....

Sid Dunmore will recieve a tax refund of up to 11.5 million dollars.

http://www.bizjournals.com/sacramento/stories/2007/12/03/story2.html