You closed on a Germantown commercial property, moved your business in, and months later a contractor you have never met files a lien for tens or even hundreds of thousands of dollars for work done before you ever saw the building. Your lender is suddenly asking questions, your title looks cloudy, and you are wondering how this is even possible when your closing documents said you were getting clear title.
Commercial buyers in Germantown and the surrounding Tennessee communities run into this situation more often than most people realize. In a competitive market, properties move fast, improvement projects are constant, and the paperwork that should tie construction, payment, and title together does not always keep up. What looks like a clean, routine closing can, months later, turn into an unrecorded lien dispute that threatens your financing, your tenants, and your long-term plans for the property.
At Snider & Horner, PLLC, we see these disputes arise in Tennessee deals when mechanic’s or supplier liens are missed or mishandled in the rush to close. Our civil and small business work across Tennessee and Mississippi often involves going back through contracts, construction records, and closing files to find out what really happened and who should bear the cost. In this guide, we want to show you how unrecorded lien disputes actually develop, where the process breaks down, and what you can do if you are facing one now or trying to avoid one in your next purchase.
How Unrecorded Liens Happen In Germantown Commercial Deals
Mechanic’s and supplier liens in Tennessee begin with something simple. Someone provides labor or materials that improve a piece of real estate, and they are not fully paid. Contractors, subcontractors, and certain suppliers then have legal rights to secure their unpaid bills against the property they improved. These rights do not start when a piece of paper is filed at the courthouse. They start when the work is done or the materials are provided, which is why a lien problem can already exist even though nothing shows up in the public records.
For a time, those rights are inchoate, meaning the contractor has a legal right to file and enforce a lien, but may not yet have recorded anything that would show up in a title search. Tennessee law generally gives contractors a defined period after completion of work to record their lien claim. That filing is what puts the world on formal notice. The gap between the last day of work and the final deadline to record the lien is where buyers are most exposed. A title search during that window can come back clean, even though someone already has the right to cloud the title later.
Consider a Germantown retail building that underwent a major renovation before you bought it. The prior owner hired a general contractor, who in turn used several subcontractors and suppliers. The project finishes, but the owner disputes the final invoices. You negotiate a purchase, your title company searches the public records, and at that moment no liens appear. You close, your lender funds, and you open your doors. Months later, still within the contractor’s deadline to record a lien, the unpaid contractor files against your property. The work was done before closing, but the recording happens after, which is exactly how an unrecorded lien dispute lands in your lap.
Where The Commercial Sale Process Breaks Down
Most Germantown commercial sales follow a similar path. There is a letter of intent or purchase agreement, a due diligence period, a title commitment from a title company, lender underwriting, and then a closing where funds and documents change hands. At each stage, there are chances to uncover or control lien risks tied to recent construction. When those chances are rushed or skipped, unrecorded lien disputes become far more likely. The failure is usually not one big mistake, but several small oversights lining up.
During due diligence, buyers and their advisors should ask detailed questions about recent or ongoing work. Was the building renovated in the last year or two. Were there build-outs for prior tenants. Who did the work. Were there disputes about quality or payment. Too often, the answers to these questions are vague, or the questions are never raised. On paper, the seller provides an owner’s affidavit saying there are no unpaid bills that could result in liens, but the affidavit is treated as a formality rather than a document whose accuracy will matter if a contractor later records a claim.
The title commitment is another critical checkpoint. It shows recorded liens, mortgages, easements, and other encumbrances that the title company found when searching the public records. However, it can only reveal what has already been recorded. If your commitment is issued weeks before closing and is never updated, it may miss anything recorded in that gap. A proper bring-down search shortly before funding can reduce this risk, but in fast-moving Germantown deals, closings are sometimes pushed forward without a fresh check, especially when parties feel pressure to meet lending or occupancy deadlines.
Construction-related documents are a third area where the process often breaks. Final invoices, conditional and unconditional lien waivers from general contractors and key suppliers, and escrow arrangements for known disputes are all tools that can limit a buyer’s exposure. When we are asked to untangle a lien dispute after closing, we often find that some of these tools were only partially used or not used at all. The closing package may have a generic lien waiver from a general contractor, but nothing from the subcontractors who later file liens. Or there may be language about unpaid work in side emails that never made it into the closing documents.
Who Gets Blamed And Who May Actually Be Liable
Once a lien appears on your Germantown property, everyone starts pointing fingers. Buyers tend to blame sellers and title companies. Sellers claim the contractors are greedy or filed improper liens. Contractors, in turn, insist they were not paid and did everything by the book. Lenders and title companies often say they relied on the documents the parties provided. Underneath all this blame, the legal questions are more precise. Who knew about the work and the unpaid bills. Who made promises in the purchase agreement. Who controlled the disbursement of funds at closing.
Sellers usually give representations and warranties in the purchase agreement about the condition of title and the absence of undisclosed liens or claims. They may also sign sworn owner’s affidavits at closing, affirming that all contractors and suppliers have been paid in full. If it turns out that the seller knew about ongoing payment disputes, or failed to disclose recent work that could give rise to liens, those misstatements can form the basis for breach of contract or fraud claims. The seller may have a duty under the contract to indemnify you and clear the lien, but sellers rarely agree to this without a fight unless the documents are clear.
Contractors, subcontractors, and suppliers have their own set of duties. They generally must follow Tennessee’s notice and timing rules to preserve lien rights. They often sign conditional lien waivers in exchange for partial payments, and unconditional waivers once they are paid in full. If they record a lien in violation of a clear unconditional waiver, or outside statutory timelines, those facts can be used to challenge the lien’s validity. On the other hand, if the paperwork is sloppy or incomplete, they may argue they preserved their rights and did nothing wrong by recording against the property you now own.
Title companies and lenders sit at the center of the closing. They rely on contracts, affidavits, and payoff statements to structure the flow of funds. If a title company failed to follow written closing instructions, or missed a recorded lien that was visible on a proper search, it may face exposure. However, when a lien was not yet recorded at the time of closing, the analysis is more complicated and often centers on what questions were asked about recent work, and whether there were red flags that the title company or lender ignored. Courts generally look closely at the specific instructions and documents each party had, and whether they acted reasonably in light of that information.
Because our civil practice at Snider & Horner, PLLC involves sorting through overlapping contracts, affidavits, and payment histories, we approach unrecorded lien disputes with a focus on evidence rather than blame alone. We line up work dates, payment dates, notice dates, and closing timelines, and compare them against what the seller promised, what the contractors signed, and what the title commitment showed. This kind of analysis often reveals that responsibility is shared, and that you, as the buyer, have more potential claims and defenses than you might have assumed when you first received the lien notice.
How Unrecorded Liens Disrupt Financing, Leasing, And Resale
The most immediate impact of an unrecorded lien dispute is usually financial, but the damage goes far beyond a single unpaid bill. If you own a Germantown office, retail center, or warehouse, you likely rely on that property for income, collateral, or both. A lien recorded against your title can worry lenders, delay funding, and derail future deals, even if the underlying dispute is still unresolved. Understanding these ripple effects is essential when deciding how aggressively to respond to a lien claim.
Lenders generally require clear or insurable title as a condition to making or renewing a loan. When a lien appears, especially a large claim tied to pre-closing work, the lender may pause draws, refuse to refinance, or declare a default under your existing loan documents. This can happen even if you disagree with the lien and plan to contest it. From the lender’s perspective, the recorded notice is enough to raise concerns about the property’s value and marketability. Until the lien is released, bonded off, or resolved to the lender’s satisfaction, your ability to tap equity or restructure debt can be severely limited.
Leasing and resale plans also suffer. Potential tenants may hesitate to sign long-term leases in a building that appears to be in active litigation over construction payment. Buyers and investors who run their own title checks may back away from a deal once they see an active lien or a pending lien lawsuit. Even if you eventually win a dispute or shift the cost to another party, the months or years spent under that cloud can reduce negotiating leverage, delay build-outs, and force you to expend time and money that would otherwise go into growing your business.
Title Insurance And Its Limits In Unrecorded Lien Disputes
Many commercial buyers assume that title insurance is a complete safety net against any lien problem that surfaces after closing. The reality is more complicated, especially when it comes to mechanic’s and supplier liens tied to pre-closing work. Understanding, at a basic level, what an owner’s policy does and does not promise can prevent unpleasant surprises when you file a claim related to an unrecorded lien dispute.
A typical owner’s title insurance policy insures against loss or damage resulting from defects in or liens on title that exist as of the policy date and that are not excluded or excepted in the policy. The policy date is usually the day of closing. The policy includes schedules that list exceptions, such as visible easements or specific recorded documents, and may also contain general exclusions, including certain types of mechanic’s liens. Because the policy is tied to recorded or discoverable defects as of closing, liens recorded afterwards can fall into a gray area, especially if the insurer argues that the underlying work was known or consented to by the insured.
Mechanic’s lien coverage is often addressed through special endorsements or specific exceptions. In some commercial deals, the title company will remove or narrow standard mechanic’s lien exceptions if they are satisfied with evidence that all contractors and suppliers have been paid. In others, especially where there is ongoing work or unclear payment histories, the policy may expressly exclude coverage for liens related to recent construction. Buyers who do not closely review these schedules and endorsements at closing may later discover that what they thought was a broad safety net is actually narrower in construction-heavy transactions.
When a lien surfaces after closing, title insurers commonly examine whether the insured owner knew about the work or payment disputes, and whether the lien arises from obligations that the insured agreed to. If you bought a property with a major build-out underway and took over the construction contract, the insurer might argue that the resulting lien is tied to your own agreement and falls within an exclusion. In contrast, if the work was entirely under the prior owner and was neither disclosed nor carved out in your policy, you may have a stronger argument that the lien fits within covered risks.
Practical Steps If You Are Facing An Unrecorded Lien Dispute
If a contractor or supplier has already filed a lien or sent formal notice of an intent to lien your Germantown property, you are past the point of theory and need a clear plan. The worst thing you can do is ignore the notice or assume it is a bluff that will go away on its own. At the same time, paying immediately without understanding the legal strength of the claim, or your contractual rights against other parties, can leave money on the table and weaken your position in any follow-on disputes.
Your first move should be to gather key documents. These typically include your purchase agreement, any amendments, the closing statement, the title commitment and final policy, seller affidavits, and any construction or renovation records you received when you bought the property. If you have emails or letters that mention ongoing work or disputes prior to closing, collect those too. Organizing these materials up front allows a legal review to move faster and more efficiently, which matters when filing deadlines and lender patience are both ticking.
Next, you should consult legal counsel with experience in civil and business disputes related to real estate. A focused review should look at work dates, completion dates, notice timing, and recording dates, along with the exact wording of your contracts and affidavits. In Tennessee, lien rights are closely tied to these timelines. If a contractor recorded outside the required period, failed to give required notices, or claimed amounts that go beyond what is legally lienable, those facts may support a challenge to the lien’s validity in court or in negotiations. On the other hand, if the lien appears procedurally sound, the strategy may shift to reallocating the cost to sellers, insurers, or others.
Reducing Lien Risk Before You Close On A Commercial Property
If you have not closed yet on a Germantown commercial property, you are in a better position to reduce the risk of facing an unrecorded lien dispute later. The key is to treat construction payment and lien exposure as a central part of your due diligence, not an afterthought. A little extra scrutiny of recent work, combined with strong contract language, can provide leverage if problems emerge after closing.
Start by asking targeted questions about improvements made in the last few years. Request a list of all contractors and major subcontractors who worked on the property, along with copies of their contracts if available. Ask for final invoices and any correspondence about disputes or back charges. These requests sometimes feel intrusive, but they are reasonable in a commercial transaction. The answers can reveal whether there are outstanding issues that deserve special attention in the purchase agreement or at closing.
Next, focus on lien waivers and payment evidence. For substantial projects, you should ask for final unconditional lien waivers from the general contractor and key suppliers covering all work through completion. If a contractor will not provide a full waiver, or there are known disputes, you might negotiate an escrow holdback, where part of the purchase price is held until the dispute is resolved or specific waivers are delivered. These tools do not eliminate all risk, but they create a fund and a mechanism for addressing it, instead of leaving you to fight alone if a lien later appears.
How Snider & Horner, PLLC Helps Buyers Navigate Unrecorded Lien Disputes
Unrecorded lien disputes sit at the intersection of construction, contracts, title work, and business planning. They are rarely resolved by one simple letter or a single phone call. Instead, they require someone to sit down with the full set of documents, timeline, and players, and then build a strategy that fits both the legal facts and your business goals. That is the kind of work our civil and small business team at Snider & Horner, PLLC handles for clients in Tennessee and Mississippi.
When a Germantown buyer comes to us with a lien problem, we typically start by reconstructing the story of the property. We look at when work was done, who was paid and when, what the contracts and affidavits promised, what the title commitment and policy said, and how funds moved at closing. Using the resources you would expect from a larger firm, we can manage these document-heavy reviews. At the same time, our small-firm attentiveness means you are not left in the dark while we work. We explain what we are finding and how it affects your options.
Because our practice covers a wide range of civil and business disputes, we understand that the lien itself is often just one piece of a larger picture. A lien dispute might trigger issues with your lender, your tenants, or your plans to expand or sell. We factor those realities into our recommendations, whether that means pushing hard on a particular party to clear title quickly, or coordinating with your other advisors to align legal strategy with financing or operational decisions. Our community roots in the areas we serve, including Germantown and surrounding Tennessee communities, also give us practical insight into how local players, from contractors to lenders, tend to handle these conflicts.
If you are already facing an unrecorded lien dispute or are about to enter a commercial deal and want to reduce your risk, we can walk through your specific situation and help you map a path forward that protects your investment and your business. Call (901) 730-8880 today.