Sunday, May 29, 2016

Sellers: Get Lien Waivers

I recently wrote a post on LinkedIn explaining the Wisconsin Construction Lien Law from a contractor's perspective.  Since this blog is for homeowners (who I primarily represent anyway), this post will explain the Wisconsin Construction Lien Law from a homeowner's perspective.  In particular, I address this post towards homeowners who are planning on selling their home and are having work done in preparation for that sale.

Many sellers have their home painted to give it a fresh look and make it look more appealing to buyers.  This is generally a good idea, as long as you're not trying to conceal structural defects or signs of leakage.  While some homeowners handle all of the painting themselves, many homeowners choose to hire a professional painter.

You pay the painter in advance for the paint and pay him for his labor after he has painted all of the walls and ceilings in your home.  The painter gives you a handwritten receipt for your cash payment.  Your home looks stunning and sells quickly.  Everything is zen until the title company requires you to sign an affidavit itemizing all work that has been performed on your property during the past six months.  Upon reviewing your affidavit, the title company asks you for the lien waiver from your painter.  Like many homeowners, you ask "what's a lien waiver?"

The Wisconsin Construction Lien Law essentially protects contractors from getting stiffed on payment by property owners.  Wis. Stat. s. 779.01(3) provides as follows:

Any person who performs, furnishes, or procures any work, labor, service, materials, plans, or specifications, used or consumed for the improvement of land, and who complies with s. 779.02, shall have a lien therefor on all interests in the land belonging to its owners

Your painter arguably has a lien or interest in your property.  Your title company and your buyer's mortgage lender do not want anyone else to have an interest in the property at the time of closing.  They will not accept the risk that your contractor could foreclose on the property after closing.

I understand that this requirement makes little sense under some circumstances.  Your painter's work arguably has not been "used or consumed for the improvement of land," though the definition of "improve" under s. 779.01(2)(a)  includes "remodeling."  Your painter may have forfeited his lien rights under Wis. Stat. s. 779.02 by failing to provide you with written notice of his lien rights at the time of contracting or within 10 days after buying the paint.  Besides, you paid him in full and got a receipt!  Trouble is, the title company likely will not care that neither you nor the painter think that the painter has a lien on your property.  You will get a lien waiver or you will not close on your sale.

Wis. Stat. s. 779.05 contains the formal requirements for lien waivers.  Fortunately, this isn't rocket science.  Title companies provide lien waiver forms.  Wisconsin Legal Blank also supplies contractors with these forms.  You simply need to contact your painter and get him to complete and sign a lien waiver.

I represent both buyers and sellers in residential real estate transactions.  Please email me at rudolphkuss@stevensandkuss.com for a free initial consultation.