The liens are for work performed on behalf of a tenant. The tenant filed for bankruptcy. Can an action be filed against the property owner without naming the tenant to avoid the bankruptcy stay?
2 replies
Jun 17, 2020
Hi,
This whole setup is a bad idea and let me tell you why.
If work was performed on behalf of the tenant then what the contractor has is what is called a leasehold lien. The way lien laws work is that you have an interest in the property up to the extent of the person or people who did not pay. When a tenant enters a contract with a landlord, their interest is called a leasehold interest. They are leasing the property. It is not theirs.
When a contractor liens on the property interest of the leaseholder, the contractor may only foreclose on the leasehold interest. Which means, in most cases, the contractor would merely become the new tenant subject to the agreement the old tenant signed with the landlord. HOWEVER, in a large number of times, there's a clause in the lease agreement saying that the creation of any lien as a result of the tenant's actions (failure to pay the contractor) is a material breach of the contract and the contract may be terminated as a result. What this means for the contractor is that they would win the lawsuit, foreclose on the leasehold, become the new tenant, and have the tenancy terminated. This leaves the contractor with nothing but a bunch of legal fees.
To answer your question more specifically, you must name the property owner as well as the leaseholder in the lawsuit. You are correct when you assume this will violate the automatic stay. It will. If you really want to, you can place yourself as a creditor in the bankruptcy action or you can contact an attorney and try to initiate an adversary action in the bankruptcy proceedings. However, the likelihood of the judge granting the adversary action when you have a clearly defined bill is next to zero. You'll just be another bankruptcy creditor.
Unfortunately, the contractor on this question got absolutely hosed. Give me a star if you found this info useful!
E. Aaron Cartwright III
214-789-1354
Aaron@EACLawyer.com
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Helpful
Jun 17, 2020
Hello,
Typically in a lien foreclosure action, if that is the only cause of action being filed, the owner and then lien claimant are the only two parties. Additional parties, such as the tenant, could be added under a theory such as breach of contract, but is not a required party to the lien foreclosure claim. To make sure your lien is valid and able to be foreclosed, contact an attorney to fully evaluate your claim.
Feel free to reach out if you have further questions.
Thanks,
Kelly Stamy
Associate Attorney
8431 Katy Freeway
Houston, TX 77024
Tel: (713) 715-7334
www.TheCromeensLawFirm.com
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