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What Is a Mechanic’s Lien?
Mechanic’s liens are legal claims against an individual’s home or property. Usually, contractors or subcontractors file such liens when they have not received payment for property improvements or renovations.
Liens allow contractors and suppliers to seek payment when carrying out new projects. A lien hampers the property owner’s ability to sell or refinance the real estate at hand. If your general contractor fails to pay her or his suppliers or subcontractors for their contributions to your project, they can place a lien (i.e. a “materialman’s lien”) against your property to recover their funds.
Unfortunately, it does not matter if your general contractor has already received payment for the project; should the laborers, suppliers or vendors who work for them fail to receive their payments, they can hold you legally responsible. In the end, many homeowners pay twice for the contracted work, or are have to sell their property.
How Do Mechanic’s Liens Work?
Before filing a lien, contractors must send a preliminary notice to the homeowner and any other involved contractors of their intent to file (requirements for sending preliminary notices may vary between states and counties). Then, the contractor sends a notice of lien. The County Register of Deeds records the lien notice. This lets prospective buyers and lenders know about the lien on your property.
Liens typically have an expiry date of no longer than 90 days, though they may last between six months to a year in some states. If you cannot pay the amount owed, the contractor can sue for foreclosure on your property. However, once the lien expires, the contractor can no longer enforce this by foreclosing on your property.
How to Protect Yourself From Mechanic’s Liens
You should know how to protect yourself from lien claims before you experience them. The following can help you avoid having lien claims disrupt your current projects and finances, and ensure that all contractors, subcontractors and suppliers receive prompt and proper payment.
Tip 1: Use Joint Checks
Providing joint checks is an easy lien prevention method. By making out a check to both the contractor and supplier (or subcontractor), you ensure all parties receive their expected payment, avoiding the potential for a lien claim. Joint checks are also a secure method of payment, as only the recipient can endorse them.
Tip 2: Do Your Research
Performing substantial research on your general contractor is another simple tip for avoiding mechanic’s liens. Make sure to only hire trusted, licensed contractors who, in turn, exclusively hire licensed subcontractors and suppliers.
Once you choose your general contractor, gather a list of all your laborers, suppliers and subcontractors. Consult with them on the general contractor’s payment history.
It can also help to get a written contract that clearly states when construction activities start and end, the specific subcontractors performing these activities, and the specific suppliers providing necessary project materials.
Tip 3: Get a Lien Waiver
You can also have your contractor provide a lien waiver on the construction contract. This waiver relieves you from having to pay anyone the contractor bears responsibility for paying. However, some states may prohibit a lien waiver until payments are made, so check the laws in your geographic location.
What to Do When You Receive a Mechanic’s Lien Claim
So, what happens when you receive a lien on your property?
You generally have three courses of action to choose from when dealing with a lien claim:
1. Negotiate With the Contractor
Homeowners typically negotiate with their contractor after encountering a lien claim. While you may end up paying funds you believe the contractor is not entitled to, you can also come to creative compromises.
You may be able to pay in installments, for example, or request a bit of extra work if you agree to provide the payments sought. After reaching an agreed settlement, the contractor can easily remove the lien, which allows you to refinance or sell your property once again.
2. Obtain a Lien Bond
Property owners can also turn to insurance companies to obtain bonds that can help cover the amount of the mechanic’s lien. This is also known as “surety bonds” or “lien discharge bonds”. This attaches the lien to the bond, rather than the property. Filing lien bonds are usually recommended for homeowners who need to sell or refinance their property within a short time. Otherwise, you may be better off negotiating with the contractor or taking the lien to court.
3. File a Lawsuit to Remove the Lien
Resort to filing a lawsuit to get rid of the lien only in extreme cases when you need to hire an attorney who specializes in construction or real estate law. Taking the lienor to court allows you to argue (through testimonies and evidence) that you do not owe the contractor any further payments. These cases can be expensive and time-consuming, often taking as long as months or years to resolve. As such, litigation is often recommended as a last resort.
Work With an Experienced Local Lawyer
Have contractors filed a lien against your property (or home)? Has it hampered your ability to refinance or sell the real estate? Dealing with mechanic’s liens is never a pleasant experience. However, the right legal aid can help you find the best ways of removing, contesting or preventing such claims altogether.
Our team of dedicated legal advocates is ready to assist you in resolving any lien claims that disrupted your current projects or financial situation. Connect with an experienced mechanics lien lawyer to receive the legal help you need today. Whether you need legal advice or are looking to take someone to court, our experienced mechanic’s lien lawyers are here to help.
Submit a request online or call us today at (866) 345-6784 to get in touch with an experienced lawyer in your area!
