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What is a Mechanics Lien?
A mechanic’s lien is a legal claim on a property that helps ensure they guarantee payment. Liens are also often used by a construction company against property that builders or contractors work on. It essentially places a claim on a property until payment is made in full.
How a Mechanics Lien Works
When contractors or builders are not paid for the improvements or other work they complete on a property, one choice for legal recourse that they have is a mechanic’s lien. When a mechanic’s lien is filed, it gives the construction company the right to seize monies owed and can lead to you losing your home.
Here’s how it works:
A construction company completes work on your home. When the work is complete, payment should be received in full. If a general contractor is hired along with the construction company, they are required to make payments to the construction company on your behalf. If that doesn’t happen, you can still be held liable for the payments. This is true even if you have already personally made payments to the general contractor.
In order to obtain a mechanic’s lien, most states require that contractors complete a three-step process:
Step One: Give Notice
When payment isn’t received immediately, that does not immediately constitute a need to file a mechanic’s lien. Instead, construction companies must first advise you of the amount due and give you a certain timeframe to take care of the dues, typically anywhere from 20-30 days from the time of the notice.
Step Two: File a “Claim of Mechanic’s Lien”
If payment is not remitted by the end of the 20-30 day notice period, construction companies can formally file a claim of mechanics lien with the courts. This establishes the lien itself and should be filed in the same county that the property is located in.
Step Three: Work out a Solution or File a Lawsuit
Once the lien is filed, the time clock starts. During this phase of the mechanic’s lien process, construction companies must attempt to work out a solution for a pre-determined amount of time, usually two to six months. If a resolution is not reached in this timeframe, the company can choose to file a lawsuit.
How to Avoid a Mechanic’s Lien
Mechanics liens can put you on the hook for money that you have already paid, especially if you work with a general contractor that does not pay the construction company that oversees the operation.
Since a mechanic’s lien can cause you to have to pay double or potentially cause you to lose your house, it’s important to take steps to avoid this happening. Here is a quick rundown of what you can do to avoid a mechanic’s lien:
- Use joint checks : if you’re working with multiple entities to complete a construction job, write checks in both of their names to ensure everyone gets paid
- Ask for a lien waiver : lien waivers make it so that the homeowner cannot be held responsible for paying anyone that the contractor should be paying
- Pay entities yourself : eliminate the guesswork and risk of payments being missed by directly paying each entity yourself, separately
Check out this article to learn more about how mechanics liens work.
What’s Included in a Mechanics Lien?
Effective mechanics liens protect construction companies and contractors from not being paid for completed work. In order to be successful, they must meet certain benchmarks and include vital information about the processes carried out to recover the money.
Here are a few things that any successful mechanics lien should include:
- Description of the property
- Dollar amount owed
- County in which the property is located
- Name of the claimant
- Name of defendant
- Signatures and dates
Including all vital information on mechanics, a lien is essential to make sure the process goes as smoothly as possible. If any details are missing or incorrect, it could make it more difficult to enforce the lien, therefore causing further issues with recovering missed payments.
Here is an article about the most important aspects of a successful mechanics lien.
Image via Pexels by Cleyder
Mechanics Lien Examples
Mechanics liens are essential to making sure any monies owed are paid to contractors and construction companies after work is completed. To help you understand how they work, here are some examples of mechanics liens:
Taylor’s construction company completed a complete bathroom remodel on Theira’s home. When the work is completed, the owner of the construction company realizes that $4,000 is missing in payments promised per the construction contract from Theira directly.
In response, the owner provides notice to Theira of the amount of money due and a due date 20-30 days in the future. When this time period passes, Taylor’s construction files a mechanics lien.
Theira realizes that if she doesn’t pay the balance owed, her home is at risk for liquidation or foreclosure. She reviews her design-build contract and confirms that she owes the payment, and pays the remaining balance.
The construction company gives Theira a release of lien, and the issue is resolved.
Learn more about mechanics liens by checking out this article .
How to File a Mechanics Lien
It’s never a good thing when you must file a mechanics lien, but the protections it provides are vital to ensuring you are paid. If you want to file this type of lien, the process is simple:
First, provide notice to the homeowner. This notice should include a description of the work provided, information about any monies paid, and should include how much money is owed. This notice should state a period in which you expect a response, which should be anywhere from 20-30 days.
Once the notice paperwork is complete, serve the owner.
If payment is not received, the next step is to prepare the claim of lien and file it with the county courthouse in the same area as the property is located. Be sure to check the laws in your state to determine how long you must file a claim of lien, since many states have a limit on this timeframe.
Lastly, serve the lien to the homeowner. Check the laws in your state to confirm the timeframe in which you must deliver a copy of the lien to the homeowner.
Learn more about who needs a subcontractor agreement by checking out this article .
How to Be Released of a Mechanics Lien
Getting released from a mechanics lien typically happens when payment is made in full for any outstanding balance on work completed. If you have been served with a mechanics lien, the paperwork you received when you were notified should include details about the dollar amount owed and how you can remit payment to remove the lien.
Once you make the payment, be sure to ask for a release of lien . This serves as receipt of your payment and ensures that you can prove that you have completed the steps needed to release yourself from the lien. Retain this for your records.
If you need help with a mechanics lien or need guidance on being released from one, construction lawyers can help. Post a project on ContractsCounsel today to connect with construction lawyers who specialize in mechanics liens.
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