Richard decided to go into the commercial laundry and dry-cleaning business. He began by agreeing to buy the land, building, and equipment of a small dry cleaner. Richard agreed to pay the owner $200,000 in cash and "to assume" a $50,000 existing mortgage on the property. He next entered into a contract with a local contractor to build, within five months, a large addition to the building for $150,000 with $40,000 payable with the signing of the contract and the balance to be paid in periodic installments as the construction progressed. Because Richard had heard some horror stories from friends in the local Chamber of Commerce about contractors who walked away from jobs without completing them, he asked the contractor to post a security bond or provide a surety to ensure the contract would be completed in a timely manner. Richard also had some of the existing dry cleaning equipment picked up for repair and refurbishment. When the work was completed, the repairman refused to redeliver it until Richard paid in full for the work, claiming he had a lien on the equipment until he was paid.

Richard seeks your advice on the following issues.

Questions:

1. What legal rights and obligations accompany the "assumption "of a mortgage?
2. Would Richard risk losing any of his rights to recover against the surety if he granted the contractor additional time to complete the construction?
3. If the contractor does not pay subcontractors or companies who provide construction material for the job, would they be able to assert a lien against the property until they are paid?
4. Would the person who repaired and refurbished the dry cleaning equipment be able to assert a lien until Richard paid for it? Would it make a difference if the repair work had been done on-site?
5. Richard's bookkeeper inadvertently mails payment on the land contract for $10 less that the installment amount. The person who sold the real property on a land contract declares a default of the contract and attempts to reclaim possession of the property informing Richard that he has lost all the equity he might have built up in the property. Is this true? Explain.