What Is a Mechanic's Lien?
Legal leverage to get paid on construction projectsBy Canaan Suitt, J.D. | Last updated on July 18, 2022
Use these links to jump to different sections:
- A Definition of a Mechanic’s Lien
- How Do Mechanic’s Liens Work?
- How You Can Avoid Mechanic’s Liens
- Questions for an Attorney
Generally, subcontractors work on construction projects without directly contracting with the homeowner. Instead, homeowners pay the main contractor, who in turn is supposed to pay the subcontractors and suppliers.
Subcontractors often rely on contractors to pay them. This can put subcontractors in a difficult position. What if the contractor doesn’t pay them? What recourse do subcontractors have to get paid?
The subcontractor could sue the general contractor for breach of contract. Still, a lawsuit could take a long time and involve substantial legal expenses.
The easiest and cheapest way for a subcontractor to get paid is to put a mechanic’s lien directly on the homeowner’s property. This article will explain what a mechanic’s lien is, how it works, and how to avoid them in the first place.
A Definition of a Mechanic’s Lien
A mechanic’s lien asserts a legal interest in a homeowner’s real property.
Mechanic’s liens are typically brought against homeowners by subcontractors or material suppliers who haven’t received payment for their labor or goods on a construction project.
When a subcontractor puts a mechanic’s lien on a homeowner’s property, the homeowner can’t sell their property until they pay the subcontractor. In addition to preventing the sale of the property, liens can also prevent homeowners from borrowing from lenders until the lien is satisfied.
If the homeowner doesn’t pay the subcontractor in time, their real estate or other property can be sold off to satisfy the lien.
So, mechanic’s liens are essentially a form of protection against nonpayment for work improving a homeowner’s property. Mechanic’s liens help ensure subcontractors get compensated.
How Do Mechanic’s Liens Work?
State lien statutes create mechanic’s liens. Depending on your state, they may be called property liens, construction liens, or materialman’s liens.
Because liens are created by state law, the requirements for placing a lien vary from state to state. In general, however, the lien process involves the following steps:
- Preliminary notice. To be able to file a mechanic’s lien later on, many states require subcontractors to give homeowners preliminary notice that they’re working on the project. This notice makes the homeowner aware that the subcontractor will be on the job and what they will be doing (for example, working on the roofing or pool installation).
- Notice of intent to file a mechanic’s lien. Typically, before a subcontractor can file a lien, they must make the homeowner aware of their plans to do so. This gives the homeowner time to try to resolve the issue. Depending on the state’s notice requirements, the subcontractor may need to provide a 20 to 30-day notice.
- File a mechanic’s lien. The “lien claimant” or person who wants to file a mechanic’s lien will complete a lien claim form at their county recorder’s office. The claimant will provide detailed information on the form, including facts about the construction project, the property, and the payment amount. When the lien is filed, the subcontractor becomes a “lienholder.”
- Enforce or release the lien. The homeowner will have a certain amount of time (depending on state requirements) to resolve the nonpayment issue. There are two options at this point:
- Lien satisfaction. If the homeowner satisfies the lien, the lienholder must give a lien release or cancellation. This means the lien is removed from public records so the homeowner can sell or borrow again. While mechanic’s liens eventually expire, getting a release can eliminate the satisfied lien sooner.
- Enforcement. If the homeowner does not pay the lienholder in the specified timeframe, the lienholder can pursue a civil lawsuit for foreclosure. A foreclosure action means that the property will be sold off and the money will be used to pay the subcontractor.
These steps are the general process for filing a mechanic’s lien. Still, it’s essential to understand your state’s exact requirements and time limits. An experienced construction lawyer can help you understand the specifics of your state mechanic’s lien laws.
Why Are Mechanic’s Liens Allowed?
Subcontractors should have legal leverage to ensure homeowners pay them for their work. However, it’s often general contractors, not property owners, who fail to pay subcontractors.
Typically, homeowners will pay the general contractor for all materials or labor. The general contractor is then expected to pay any subcontractors or suppliers they use on the project.
When a subcontractor isn’t paid, it’s often the general contractor’s fault for not dispersing money from the homeowner.
So why should homeowners be responsible for the general contractor’s fault? There are three general reasons:
- The homeowner has already benefitted from the subcontractor’s work improving their property
- The subcontractor needs to get paid
- The homeowner can recover their money later on by suing the general contractor
Suing the general contractor is not as easy as it may sound. If the general contractor fails to pay the subcontractor, it may not be easy to get them to pay the homeowner.
Lawsuits can also be expensive and time-consuming. The homeowner may have to pay the subcontractor immediately to get the lien taken off their house, but they may have to wait months or years to recover money from the general contractor.
In short, mechanic’s liens are valuable for subcontractors to get paid but can put homeowners in a very bad financial situation. The best option is to try and avoid mechanic’s liens, if possible.
How You Can Avoid Mechanic’s Liens
If you’re a homeowner, there are a couple of main ways to avoid having a mechanic’s lien placed on your property:
- Lien waiver. It’s a provision in the construction contract that says the homeowner will not be responsible for paying the people who the general contractor is responsible for paying.
- Paying subcontractors separately. Instead of paying the general contractor for everything, the homeowner could pay subcontractors (and suppliers) separately. This can be more involved than simply paying the general contractor but can avoid mechanic’s liens issues down the road.
- Using joint checks. When the homeowner writes checks to pay for the construction project, they make the checks out to both the general contractor and the subcontractors or suppliers. For the checks to be cashed, the general contractor and subcontractor must endorse them. This helps ensure that all parties get paid.
It’s important to note that avoiding a mechanic’s lien is not the same as avoiding paying contractors.
By taking one of these steps, a homeowner ensures everyone on the project gets paid and avoids the need for subcontractors to file mechanic’s liens.
Questions for an Attorney
If you’re considering filing a mechanic’s lien or taking legal action against a homeowner for nonpayment, it’s essential to understand your state’s legal requirements. The best way to do this is to seek legal advice from a construction law attorney in your area.
Fortunately, many attorneys provide free consultations, allowing the attorney to hear the facts of your case and for you to determine if the attorney meets your needs.
To see whether an attorney or law firm is a good fit, ask informed questions such as:
- What are your attorneys’ fees?
- What billing options do you offer?
- What are the steps for filing a mechanic’s lien?
- What are the deadlines?
- What are my legal claims?
- Are there ways to get paid without going to court?
You can visit the Super Lawyers directory and use the search box to find a lawyer based on your legal issue or location.
Look for a construction litigation attorney in the Super Lawyers directory on matters related to mechanic’s liens.
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