The law is very clear. An unlicensed contractor cannot foreclose a lien, nor enforce a contract, unless you knew, when you executed the agreement, that he was not licensed. You may have other defenses as well. Since enforcement of the lien has started, if you do not already have a competent lawyer, you need to hire one.
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The lien may not be enforceable for 2 reasons. First, as you point out, it appears he wasn't properly licensed to do the work. Not all "unlicensed" contracting will render a contract and lien unenforceable. It depends on the type of license required to do the work, as established by state licensing statutes. Second, a lien for the full value of the contract balance when the work wasn't properly done or finished is not proper. There may be other defenses to the lien but more information is needed. You should consult with a construction attorney about your legal rights. I'd be glad to discuss further with you.
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I agree with my colleagues. You need to consult with an attorney right away as it sounds like you have a good defense. If you do not have a lawyer already, www.naca.net can provide you with a list of consumer attorneys in your area.
This is not to be considered legal advice nor does an attorney-client relationship exist.