Five Ways Lenders Make Their Collection Actions More Difficult (and Pay More Attorney Fees): #5

This is the fifth and final installment of the five ways lenders make their collection actions more difficult.

RULE #5:       DON’T BOTHER TO VISUALLY INSPECT THE CONSTRUCTION SITE IMMEDIATELY BEFORE AND AFTER FILING YOUR CONSTRUCTION MORTGAGE

            Although the mortgage of a construction lender is generally entitled to priority over any mechanics lien claimant who starts its work after the mortgage is filed, a construction mortgage will be inferior to the claim of any mechanics lien claimant who starts work prior to the recording of the construction mortgage.  Consequently, the construction lender must take two steps to protect the priority of its mortgage.  First, it must inspect the property to confirm that no work has commenced at the site prior to the recording of the construction mortgage.  Second, in the event the inspection reveals that any work has begun at the site, subordinations must be obtained from every contractor who has provided such labor or materials.