Unfinished business

Jody Costello’s website is a must-read for homeowners who have endured -- or who hope to avoid -- dishonest or incompetent home builders and remodelers. The site, ContractorsFromHell.com, chronicles Costello’s four-year ordeal adding a master bedroom to her Point Loma home overlooking downtown San Diego.

After Costello and her husband, Don, fired their general contractor Richard Turek for what they considered shoddy workmanship and unprofessional behavior, Turek placed a lien on their property for unpaid work, preventing the Costellos from getting a second loan on their house.

Turek’s state contractor’s license was eventually revoked as a result of the Costello incident, although he still disputes the online account that he used substandard materials, showed up intermittently on the job site and hired unlicensed subcontractors.

“That’s ridiculous,� Turek said. “We passed every inspection all the way until final with the building inspector.�

Disputes between homeowners and contractors in Southern California result in tens of thousands of liens being placed on residential properties each year. In Los Angeles County alone, contractors placed nearly 10,000 liens on residential and commercial properties in 2003, according to the L.A. County registrar-recorder’s office. Orange and San Diego counties recorded more than 4,500 liens, Riverside County had close to 3,300 and San Bernardino County, 2,295.

A mechanic’s lien is a claim placed on a property by a contractor or materials supplier who hasn’t been paid for a remodeling or home improvement job. For contractors, liens provide a way to collect unpaid bills from deadbeat homeowners. For consumers, however, liens are paralyzing, leaving them unable to sell or refinance until the lien is lifted -- whether or not the work was completed to their satisfaction.

Once a lien is recorded, the claimant has 90 days to file a lawsuit against the homeowner. “But few do,� said attorney Stephen Elias, author of Nolo Press’ “Contractors and Homeowners Guide to Mechanic’s Liens,� now out of print. Elias estimates that nine out of 10 liens don’t result in a lawsuit.

“Contractors need a lawyer, and contractors are lawyer-adverse� because of the expense involved, he said. “When the contractor, or claimant, doesn’t follow through and file legally, the lien is null and void.�

Although a lien is a powerful tool for contractors dealing with nonpaying owners, it can be abused. “A lot of liens are from unscrupulous contractors or those with a checkered past,� said Los Angeles attorney Leslie Steven Marks, a member of the arbitration panel for the Contractors State License Board.

Mechanic’s liens often result in the so-called double payment dilemma, in which the homeowner pays twice for the same work.

Typically the owner pays the general contractor, who in turn pays the plumber, electrician, lumber supplier and so on. But if the contractor fails to pay these people, they can record a lien against the property at the county courthouse. Many owners, particularly those in a hurry to refinance or sell their homes, choose to pay a subcontractor or supplier themselves and try to recoup losses by suing the general contractor.

Larice Starr of Pedley, a town of 11,000 north of Riverside, paid $2,200 twice to a materials supplier when her house was re-roofed last year by Wooten Construction, which has since filed for bankruptcy. Starr has recovered roughly half of the second payment from the contractor’s bonding company and is debating her next move.

“My only other recourse is Small Claims Court,� Starr said, “and I have not pursued that action yet.�

Cecilia Wooten, former office manager for Wooten Construction and the ex-wife of its owner, Thomas Wooten, said there was nothing she could do to help Starr recover the money. Thomas Wooten could not be reached for comment.

Double payments have long been the bane of homeowner advocates, including the nonprofit League of California Homeowners and state Assemblyman John Dutra (D-Fremont), which have fought for years to enact state legislation to correct lien problems.

Meanwhile, the construction industry has worked vigorously to protect current lien laws, saying changes would force subcontractors and suppliers to run credit checks on contractors -- an expense that would be passed on to homeowners.

“I’m not Chicken Little. I’m not going to tell you the construction industry will end if you do away with mechanic’s liens. But it’ll take about five years -- that’s a guess -- to get it to move smoothly again,� said Los Angeles attorney Sam Abdulaziz, spokesman for the Construction Industry Legislative Council, a trade lobbying group.

Such reasoning doesn’t sit well with retired Los Angeles attorney Jim Acret, a pro-consumer consultant to the California Law Revision Commission, a state agency that reviews and recommends changes to California laws and statues.

“The subcontractor or the lumberyard decides to advance credit to a contractor,� Acret said. “Normally, any merchant that advances credit takes the loss if the customer turns out to be a deadbeat. But in this case, the homeowner takes the loss.

“It’s totally not fair,� Acret said of the mechanic’s lien law. “It’s a gross inequity and a rank injustice.�

Homeowner Gary Psotka of Dana Point is on the receiving end of such injustice. He had a dispute with Roofing Specialist, a Costa Mesa roofing contractor, over damage done to his house during a $25,000 reroofing job. He refused to pay the final $600 he owed the contractor, who in turn filed a lien.

Although Psotka later agreed to pay the $600 so he could have the lien removed and refinance his home mortgage, the contractor has since demanded a larger sum. “I haven’t paid him the money,� Psotka said. “And I’m going back to court to find out how to remove this lien.� Calls to Roofing Specialist owner Dave McEuen for comment were not returned.

Dutra has introduced Assembly Bill 286 to protect homeowners from mechanic’s liens, provided they’ve paid their general contractor “in full and in good faith,� said Joe Furtado, a consultant to the Assembly Transportation Committee. The bill is limited to home improvement contracts of $15,000 or less, however, rendering it toothless on large remodeling jobs. AB 286 has passed the Assembly and is awaiting hearing in the Senate Judiciary Committee this spring.

The construction industry, not surprisingly, opposes the bill. Abdulaziz, of the Construction Industry Legislative Council, points out that mechanic’s liens are guaranteed by the state Constitution, and that nothing short of a constitutional amendment can change that. But to homeowners, the situation is unacceptable.

“It’s a nightmare,� said Jody Costello, who plans to launch Concern for Homeowners, a nonprofit organization to educate consumers on construction matters and to raise funds to pay ContractorsFromHell.com operating costs. “Unless consumers -- hundreds of thousands of us -- make a demand on the Legislature, nothing’s going to change.�

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Safeguarding against a lien

Homeowners can take steps to protect themselves from malicious liens, double payments and related headaches:

* Hire a licensed, reputable contractor with references. Check the Contractors State License Board website, www.cslb.ca.gov, to make sure the contractor’s license is valid and to see if any disciplinary actions have been taken against the contractor.

* Limit upfront payments to 10% of the contract price or $1,000, whichever is less. By state law, a contractor cannot ask for more.

* Ask for a list of subcontractors and materials suppliers on the job to know who could potentially record a lien.

* Be aware of lien-filing deadlines. A general contractor who signs a contract with the homeowner has 90 days after completion of the work to record a lien. Subcontractors and suppliers have 60 days.

* After recording a lien, a general contractor has 90 days to file a lawsuit. Subs and suppliers have 60 days.

* Monitor the billing process carefully; insist that subcontractors and suppliers submit copies of their bills to you and the general contractor.

* Write dual-party checks payable to the general contractor and to the subs and suppliers. Both parties will need to endorse the check, ensuring that the subs and suppliers are paid.

* Ask all contractors and suppliers on the job to sign lien releases after their work is complete and they’ve been paid.

* After the job is complete, file a Notice of Completion with the county recorder. This reduces by 30 days the length of time a contractor or supplier can file a lien.

Jeff Bertolucci can be reached at [email protected].