BFP
- Need a legitamate claim to title
- Pays Value
- Is without notice of someone who has priority over
Person claiming BFP bears burden of proof Except if junior claimant from a judgment or the legal process
Future Advance Clauses
can only cover such demands as arise directly out of dealings between the parties to the instrument.” (quoting 59 C.J.S. Mortgages)
* “[M]ortgage stipulations securing future indebtedness apply only to those debts which were reasonably within the contemplation of the parties.” o A first-in-time mortgagee with a future advance clause will always be valid and secured IF the future advances are made prior to a 3rd party claim. (superior to 3rd party mortgages which come later).
Mortgages in After - Aqcuired Property
- After-acquired property clause — obligation will be secured by the specific property you now own, and property you later acquire.
- The after-acquired clause is clearly enforceable between the mortgagor and mortgagee
- Between mortgagee and later claimants — **not generally enforceable!
o After-acquired property clause does not create good notice to later claimants and mortgagees. **You’d have to check records for mortgagor’s other properties in all counties in the country to find out if there is a clause which affects the property in question.
Fixtures
need more clarifications
- Intention is key in determining whether property is a fixture.
- If the item becomes a fixture (part of realty), then the real property claimant wins.
- If the personal property claimant files before the real property interest is recorded then the personal property interest prevails over RPI.
If its Fixture then the real property claimant wins
Unless the personal property claimant satifies the UCC.
- ## the security is a purchase money security interest - (PMSI) is a special type of security interest that gives a lender priority over other creditors when financing the purchase of specific goods, essentially allowing them to “jump ahead” in line to claim the collateral if the borrower defaults,
- the interest of the real property owner arose before they became fixtures
- the security interest is perfected by fixture filing before goods become fixtures or within 20days after
Unless
Mechanics and Materialmen Liens
Constitutional Lien
Who and it was case is it available for? Homestead wrinkle?
- Available only to those contracting directly with owner(not available for subcrontractors)
- Availbale for improvements directly to an article or building
- Self executing for non-homesteads ( no notice or filing requirments but need to perfect against third parties)
- -
Mechanics and Materialmen Liens
Statutory Lien
- Puts into effect Constitutional lien
- ## used if you want to bind subcontractors or third parties
M&M
Perfection
2 methods
To perfect a lien, a subcontractor must file an affidavit and provide notice to the owner. If the subcontractor does not do this, they will not have any legal rights.
To fix a constitutional lien on a homestead, the person who is to furnish material
or perform labor and the owner must execute a written contract
setting forth the terms of the agreement.
***
(e) The contract must be filed with the county clerk of the county in
which the homestead is located.
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Retainage and Trapping
- General contractor does not need to perfect any lien (self-executing on non-homesteads)
- Subcontractors DO need to perfect lien according to statute if they want a lien.
Trapping
Subcontractor can trap owners funds by providing notice and filing lien affidavit(perfecting lien)
o An owner is not liable for anything he pays to the original contractor before he receives notice (from a complaining sub)
o If the owner does receive notice, the owner is liable (and the property is subject to lien) for any money thereafter paid to the original contractor.
o Even if the subcontractor perfects the lien, he may be out of luck if the owner already paid the general contractor.
Retainage
What must you do to perfect?
During process of work and for 30 days after the work is completed, the owner must retain 10% of the contract price
o Claimant has a lien on the retained funds IF he perfects his lien by sending notice and filing affidavit.
o If owner fails to comply with retainage, the subcontractor has a lien to the extent of the amount owner should’ve been retained under the original contract
M&M
Homestead
Construction Contracts Requirments
Savings Clause Exception?
Work done must be reasonably related to the use and enjoyment of the homestead for a lien to attach to the homestead (not about geography think use)
- the homestead constitutional and statutory provisions require a contract, and a substantially performed contract suffices.
- Corollary: cannot enforce any lien without substantial performance (and certainly not a homestead lien, as there’s no enforceable contract).
* Exception: can recover / have lien rights without substantial performance if there is a “savings clause” (a contractual provision that allows for recovery without substantial performance) – and this also applies to homesteads (because there is now an enforceable contract).
M&M
Priorities
- M&M v. Others
- M&M v. M&M
Inception?
v. M&M
- Perfected mechanics liens are on equal footing
v. Others - Win against everyone else
- exept when competing interest existed at the time of inception of the mechanic’s lien
- ▪ Inception is the “commencement of construction of improvements or delivery of materials to the land” – improvements can come in various forms not an exhaustive list
- - Exception: even if competing interest predates the inception of mechanic’s lien, M&M lien can still win if the material can be removed from land without injury to the property.
When the inception date is not defined, courts look to the commencement of substantial construction
M&Ms
Payment Bonds
- A type of surety bond posted by contractor to gurantee that his subcontractors and material suppliers on the project will be paid
- Protection for the owner and the subcontractors
- Owner released from trapping and retainage duties
- subs must perfect (provide adequate notice) to take adavatge of the bond
- The bond DOES NOT eliminate the constitutional lien of the general contractor
- MOST IMPORTANT is that the bond must equal the total amount of the contract price.
- Not all subcontractors are protected — only those who are working directly with the GC who procured the bond.
