Be wary if you build, remodel a home

This is a great article published in the Free Press for those who are considering doing some updating or remodeling to their home.

Thousands of Michigan consumers who build or remodel a home could face higher costs and a greater risk of legal problems because of the insolvency of a little-known Michigan fund.
The Michigan Homeowner Construction Lien Recovery Fund has operated since 1982 to protect homeowners from having liens slapped on their property for work they've paid for. The fund pays subcontractors for work they've performed when a developer or general contractor doesn't pay his or her workers.

With the nationwide real estate crash, many developers and general contractors have gone broke, leaving subcontractors unpaid. Those subcontractors in turn have swamped the state fund with claims to the point where the fund is broke.

With no way to get paid for past work, subcontractors either will make consumers pay more up front or slap liens on consumers' homes -- which means a homeowner could face a bill of several thousand dollars that already was paid to the general contractor. Moreover, the house can't be sold until the lien is taken care of.

Claims exhaust builders fund

Lumber dealer Robyn Beckett of Warren has gotten squeezed by the depressed real estate market just like thousands of other suppliers and subcontractors in the state. Not only are sales down, but she's not getting paid by many longtime customers. "I have 6-foot-2 guys sit at my desk, crying. They say, 'I know I owe you the money and I want to pay you, but I have no work,' " she said.

Over many years, a State of Michigan fund cushioned such hardship for suppliers and subcontractors by paying for work when a developer or general contractor stiffed his or her workers. The fund protected consumers, too, because subcontractors didn't have to slap liens on homeowners' property for work the owners had already paid for.

But now, the Michigan Homeowner Construction Lien Recovery Fund is broke -- a victim of too many claims stemming from the nationwide real estate crash.

The result of the fund's insolvency: Even more construction industry contractors and suppliers are likely to go bankrupt, and more liens and lawsuits are likely to be filed. Both outcomes could further chill Michigan's already depressed real estate markets.