Q: I’m a contractor who has completed repairs on a house that was damaged by fire. The insurance company for the owner of the home sent the insurance proceeds check to the owner’s mortgage company. The mortgage company has paid me for the first part of the work I completed.

I was almost through with the job and the mortgage company sent out their inspector and he wrote that the job was 95 percent complete. The only thing needed to complete the job was the carpeting. The mortgage company said that they would release the final balance of the money to me.

But the house is in foreclosure and now the mortgage company refuses to pay me the money that the insurance company gave them as reimbursement for the costs of the repairs. How do I go about getting my money?

A: As a contractor, you may have certain rights under the laws in the state in which the home is located. Those laws generally give you the right to lien the home for unpaid money due you for work performed on the home. Those laws are generally referred to as mechanic’s lien laws.

In addition, all states have foreclosure laws that govern the process that a lender must take to sue a homeowner for amounts that are unpaid on a home loan. Those foreclosure laws in turn dictate what a lender must do and how a lender will get paid in the process. This process also will include a mechanism to take care of other lien holders at the property.

Who Hired the Contractor to Make Repairs?

The first question to answer is “Who hired you?” Were you hired to make the repairs to the home by the owner of the home or the mortgage company?

If the mortgage company hired you, you can file a mechanic’s lien against the home for the unpaid balance owed to you for the work you completed. You may also have to sue the lender for payment for the services rendered to the lender.

If the homeowner hired you, you may have a bigger problem. While you can file a mechanic’s lien against the home, you will have to protect your interests in the value of the improvements you put into the home by joining in the foreclosure proceedings to claim your money.

When a mortgage lender gives a buyer a loan (or a current owner that refinances his or her home), the lender wants to make sure that the lender’s mortgage is at the top of the food chain when it comes to all the liens that may attach against the home. The lender wants to make sure that when the lender forecloses on the home, the lender can get all or as much of the proceeds from the sale of the home to pay off the loan.

However, in certain circumstances — and you may fall into this category — foreclosure laws can have exceptions, particularly where a contractor has improved the home and the judge in the foreclosure proceeding decides that the contractor should get paid for that work ahead of the lender with the mortgage on the home.

You should immediately consult with an attorney who has plenty of foreclosure and lien experience to protect your interests in the foreclosure case. Depending on your state, you may come out fine.

Oct. 9, 2008.