Overcoming Mechanics Liens and Other Obstacles
When a unit is newly built and still owned by the developer or sponsor of the development, mechanics liens can make what should be a simple process much more complicated.
New Condo Unit in Brooklyn – Purchase price $2,700,000 with a loan of approximately $2,400,000
Fee Policy – $10,197
Title Fees – $2,317
Recording Fees to Kings County – $500+
Mortgage Tax to NY – $52,000+
Transfer Tax to NY – $49,000+
Mansion Tax to NY – $33,750
When a contractor or supplier maintains that it wasn’t fully paid for services or that some other contract provision wasn’t met, the recourse is to file a mechanics lien against the property. Nothing can be done with the property until the lien is satisfied or other steps are taken, which can delay closing or refinancing.
Developers can “post a bond” which is the equivalent of obtaining a form of insurance and allows the lien to be removed as an obstacle on title. At that point, the contractor/supplier will attach the bond, rather than the property itself, to the lien.
Many other issues can also delay a property sale, including various city violations and judgments. New owners may need a letter of indemnity from the developer indemnifying the future owners and lenders from financial harm. Additionally, some of the sale proceeds may need to be held in escrow. Sometimes, depending upon the issue and the developer’s finances, we may need to find a creative solution to satisfy judgments and permit the sale to move ahead.
If you have any questions about sponsor units or other title challenges, or if you would like to discuss an upcoming or potential transaction, please contact us.