The buyer on my carry wants to do the garage himself
Closed last week on a carry I've been building for two months and I already have a problem I didn't write into the note.
The deal: 3/2, 1,450 square feet, full gut, sold at 312k. Buyer put 12% down (37,440), note is 274,560 at 9%, 30 year amortization, 6 year balloon, payment 2,209. I left the detached garage unfinished on purpose because it wasn't going to appraise into the price and the buyer wanted it as a workshop anyway. He negotiated a 4k credit for it and I thought that was the end of it.
Now he's telling me he's hiring out the conversion into a studio unit, permits and all, and he's mentioned a number around 45k. He's excited. I am doing a different calculation. Every trade he hires can file a mechanic's lien against a property that secures my 274k note, and I don't get notice of any of that unless I go looking. If the conversion stalls halfway, my collateral is a house with a torn open garage and a lien behind me, and any recovery I'd run through would inherit that. Lien priority and the notice a contractor has to give an owner both vary by state, which is exactly what I need to go read.
What I have in the note: proof of insurance annually with me named, taxes escrowed through a servicer, standard default and acceleration language my attorney drafted.
What I don't have: anything about alterations, permits, or requiring lien waivers. Also no clause about the studio changing the property's legal use, which the county may or may not care about.
The decision in front of me is whether I ask to amend the note now, ten days after closing, and what I'm willing to trade for it. He has leverage in that he can say no. I could also just require certificates of insurance and unconditional lien waivers as a condition of me not calling anything, except I'm not sure my current default language gives me a hook to require anything. My attorney is looking at it Thursday. If anyone has written an alterations clause into a carry back note after the fact I'd like to know what it cost you.