Mechanic's lien can spur foreclosure suit

by Christopher Combs Special for the Republic Jun. 30, 2010 12:00 AM

Question: After trying to sell our Chandler home for more than a year, we have decided to stay in the home. We signed a contract with a contractor to do some remodeling work in the kitchen, but the work was of very poor quality. We paid the contractor just $4,000 of his $10,000 bill. The contractor has now recorded a $6,000 mechanic's lien against our home. We have approximately $80,000 equity in our home, and our understanding is that the homestead exemption protects up to $150,000 equity in our home from any judgments of creditors. If we do not pay the contractor the remaining $6,000 owed for the remodeling work and we are sued by the contractor, will the $150,000 homestead exemption protect the $80,000 in equity that we have in our home?

Answer: No. The bad news for you is that under Arizona law, the $150,000 homestead exemption does not protect you against mechanic's liens. The good news for you is that if the mechanic's lien against the home is not foreclosed upon by the contractor within six months from the date of the recording, it will be extinguished. The foreclosure of a mechanic's lien requires a foreclosure lawsuit, and many contractors do not want to spend the time and money to foreclose the lien. The contractor, however, would still have the right in the next six years to sue you in Justice Court for the $6,000 owed.

Arizona's $150,000 homestead exemption protects up to $150,000 in equity in a home from judgments for credit-card bills, medical bills or similar debts. If a homeowner consents to a secured interest in the home, for example, a mortgage loan, the $150,000 homestead exemption does not protect against foreclosure. Although most states have some type of homestead exemption, the protection of these homestead exemptions varies significantly from state to state. For example, Florida has an unlimited homestead exemption that protects homeowners from all judgment creditors no matter how large the amount of the judgment, and is the reason that O.J. Simpson moved to Florida and purchased an expensive home.


Mechanic's lien can spur foreclosure suit