A contractor files a mechanic's lien in Alabama for $45,000 of unpaid work. If the lien is foreclosed and the property sells for $38,000 after legal fees of $3,200, how much can the contractor recover?
Correct Answer
C) $34,800
The contractor can recover the net proceeds after legal fees: $38,000 - $3,200 = $34,800, which is less than the lien amount.
Why This Is the Correct Answer
When a lien is foreclosed and the property is sold, the contractor recovers only the net proceeds remaining after court-ordered legal fees are deducted. $38,000 (sale proceeds) − $3,200 (legal fees) = $34,800. The contractor cannot recover more than what the sale generates net of costs, regardless of the original lien amount.
Why the Other Options Are Wrong
Option A: $45,000
$45,000 is the original lien amount, but the contractor cannot recover more than the net proceeds from the foreclosure sale. Lien foreclosure does not guarantee full recovery if the property sells for less than the lien.
Option B: $38,000
$38,000 is the gross sale price before deducting legal fees. Legal fees are paid first from sale proceeds, so the contractor receives what remains after those costs.
Option D: $41,800
$41,800 appears to result from adding legal fees to the sale price rather than subtracting them, which is mathematically incorrect and contrary to how foreclosure proceeds are distributed.
Memory Technique
Think of a funnel: Sale price pours in at the top, legal fees drain out first, and the contractor collects from what flows out the bottom. Net proceeds = Sale price − Costs.
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