What happens if a lien is filed?
Question Details: I am doing a home flip. The contractor has been paid more than his contract stated but wants more money now even though he didn't do additional work. He says if I don't pay him that he will file a lien against the property and I will have to pay to sell the house.
Ignoring for the moment that you can seek to have an invalid or unjustified lien dismissed (we will discuss that below), if the lien is filed, there was will be a notice filed with the county which will come up whenever anyone searches or looks at title to your home, which will show that there is a claim against the property for a certain amount of money. Any possible buyer will know that the lien must be paid off before they can take title, and if you sell the house, to be able to transfer the buyer clean title, you will have to pay the lien off. So it can obstruct selling the house and can result in some of the proceeds of the home sale going to the lien holder, not you.
However, a lien can be dismissed by the courts if you bring a legal action or challenge to it and prove that it is not justified--for example, that you paid all the money owed the contractor. If he files a lien knowing or with reasonable grounds to know that it is unjustified, you could countersue him for "abuse of process" or "malicious use of process" (deliberately misuing the legal process for an improper, not legally justified reason) and/or seek sanctions under the court rules for "frivolous" (or baseless/unjustified) litigation. So you could tell the contractor that if he does this, you will countersue and seek sanctions for frivolous litigation and also file a complaint with the state agency or board which licenses contractors.