So far, I heard that the a few of the homes in my community have gotten notice, so the builder must be in a jam....they have a very good reputation too, so it must be financial hardship. Hope it will be taken care of soon.
Everyone's already told you to contact your title company, so that's your first step. This is called a "mechanics lien" and they can get really tricky (I'm a real estate professor and agent).
Please let us know how it goes, and in the meantime, I'll be holding a good thought for you.
Any time that a contractor does work on a home and does not get paid, they can record a claim (lien) against the property in order to collect the money owed to them. You should ask the title company that provided title insurance when you purchased the property to research the public records and see when the lien was recorded. They might be liable if the lien was recorded before you purchased the property and they didn't catch it. I'm not sure if they are liable for liens recorded after you purchase the property. The builder should have paid the contractor who did the work on your house; but if they are insolvent the contractor may be trying to collect from the new homeowners. If you don't get results from the title company or the builder you might want to seek legal advice from a real estate attorney. If the amount is small, a cheaper option might be small claims court.
Immediate action is required.
In case you subsequently have to hire a lawyer, write down all details of the conversation, perhaps even follow the conversation up with a summary letter to the person you speak to at the builders office, and keep a copy of your letter.
It might also be a good idea to check the website of the CSLB to see if the builder and the subcontractor or material supplier is in good standing with the state.
The CSLB has a web page on Understanding Mechanics Liens:
Reading that page might save you some lawyer-on-the-clock time
If you need a referral to a good real estate attorney, just let us know. I have one in your area that can assist you!
I am really sorry this happened!