The Ethics of Mechanic's Liens Pt. 2 - Got 'Em Over a Barrel

Under South Carolina Law, a court cannot dissolve a mechanic's lien if the contractor makes a prima facie showing for filing the lien or if the amount owed depends upon which of the party's allegations are to be believed. Sea Pines Co. v Kiawah Island Co. S.C. 153, S.E.2d 501(1977) . However, the mechanic's lien can be powerful tool. The presence of a mechanic's lien can be devastating to an owner. To bond off a lien an owner must pay into the court one and one third the amount of the lien. Unscrupulous contractors could file liens and inflate the amounts owed in order to gain a collateral advantage over the owners forcing them to bond off the lien at some exorbitant price. If the owners are unable to bond off the lien they face a myriad of problems including the halt of construction, no access to construction loan funds and potential foreclosure. This makes the lien a tempting tool to force the owner capitulate as to disagreements over the construction, payment or other issues.

To protect owners from abuse the code has built in that portion of §29-5-100 which will invalidate the lien if "it appear that the person filing the certificate has wilfully and knowingly claimed more than is his due". This standard would suggest actions which are intentional in their nature, not just a mistake in accounting. However, it may also include a contractor that evidences a wilful disregard for any care in calculating the amount of the lien. Actions such as reverse engineering the costs of extras and change orders which are not in writing, guessing, estimating and generally calculating your lien amount without a real factual basis of the actual costs can lead to the dismissal of the lien.

Of course, it goes without saying that abusing the lien process solely as a collateral advantage in a dispute with the owner could quickly lead to problems. Not only could it lead to the dismissal of the lien but can also result in the personal liability of the contractor for the owner's attorney's fees and costs under the mechanic's lien statute as well as other potential liability in fraud and abuse of process. Recently one contractor learned the hard way that the filing of a lien to "hold the owner over a barrel" resulted in a judgment against his company and him personally for filing a lien which the judge indicated was "wholly unsupported, the result of mere guesswork and which was used to create an improper collateral advantage over the owners."

For over 40 years, the Finkel Law Firm has represented individuals and businesses in construction and mechanic's lien cases. If you require legal assistance involving construction or mechanic's liens, please do not hesitate to contact the Finkel Law Firm.

* Any results the law firm may have achieved in past cases do not imply or indicate that similar results may be had in your case. Outcome of litigation is dependent on many factual and legal circumstances that may differ in your particular case.

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