What Is A Mechanic’s Lien? 11 Things (2024) You Ought To Know

To avoid taking on financial losses due to lack of payment, contractors and suppliers will sometimes file a mechanic’s lien as a security measure.

These liens give certain entities a stake in the property they worked on, ensuring payment will be received regardless of if the property owner is able to pay or not.

If you are a property owner, and a contractor wants to file a mechanic’s lien, understanding what that entails is crucial for protecting your property and financial interests and knowing what legal ground you have to stand on.

So, consider this article as your guide to everything you need to know about these liens.

Let’s get into it!

1. What is a Mechanic’s Lien?

A mechanic’s lien is a type of hold against a property that’s filed by contractors, material suppliers, and laborers.

The lien is filed at the county recorder’s office, and it ensures that the claimant involved in the construction process will be one of the first parties to get paid in the event of a liquidation.

A construction company can file a claim when a job has been completed, but the payment has not been made on time.

Additionally, any subcontractors who did not receive payment from the construction company can also file a claim against the property owner (see the next section for more information).

Mechanic’s liens have been around since the Roman Empire, but they became popular in the United States in the 19th century.

Thomas Jefferson is attributed to the popularization of mechanic’s liens; however, it’s unlikely that he is solely responsible for bringing the idea over.

Mechanic’s liens helped encourage construction growth in the United States by introducing fair compensation, enhanced risk mitigation, and a sense of legal security.

2. Who Can File a Mechanic’s Lien?

So, who can file a mechanic’s lien?

Of course, the primary construction company or contractor in charge of the project can file a lien.

However, homeowners are often surprised to find out that the subcontractors and material suppliers that were hired by the primary construction group can also file liens.

Even if you pay your contractor the appropriate amount, but they fail to pay the other parties involved in the project, the unpaid parties can file a mechanic’s lien.

Seems a bit unfair, right?

Well, that is why it’s important to understand how a mechanic’s lien works and the steps you need to take in order to keep your property and finances safe.

Here’s a list of entities that can file a mechanic’s lien:

bulletPrimary construction groups and contractors

bulletMaterial suppliers

bulletSubcontractors

bulletLaborers

3. What Types of Construction Projects Are Mechanic’s Liens Commonly Used for?

A mechanic’s lien can be filed for a number of different construction projects.

The rules regarding the lien vary from state to state, but in general, contractors, suppliers, and subcontractors can utilize the lien for any private construction project.

For example, projects related to residential homes, commercial buildings, public infrastructure, and renovation and remodeling projects are all subject to mechanic’s liens.

Before finalizing the deal of a construction project, it’s important for both property owners and contractors to fully understand the local laws on mechanic’s liens.

4. Are Mechanic’s Liens Prioritized Over Other Types of Liens?

There are many types of liens that can be placed on a house at the same time.

Some of the most common liens are mortgage liens, tax liens, judgment liens, and Homeowners Association (HOA) liens.

However, in many states, mechanic’s liens are categorized as special liens, and they are given priority over others in the event of a liquidation.

Because construction projects are directly related to the value of the property, the mechanic’s liens get pushed to the top of the list; states also prioritize these liens to protect construction workers from falling into a financial hole.

It’s important to note that mechanic’s liens are not always prioritized; prioritization of liens is dependent on location.

5. How Can You Protect Yourself as a Property Owner?

As a homeowner, you have the ability to protect yourself from mechanic’s liens, but it takes a bit of awareness and proactiveness.

Here are a few important steps all homeowners should take to protect themselves from Mechanic’s Liens:

bulletResearch Construction Companies/Contractors

You shouldn’t just choose anyone to handle your construction projects.

Before hiring a group or person, do your due diligence and check their reputations.

You can do this by reading online reviews and looking for complaints at the consumer protection office.

Hiring a reputable contractor will minimize the chances of payment issues in the future.

bulletFinalize a Clear Contract

The finalized contract should leave zero room for confusion.

It needs to outline the timeline of the project, total price, payment structure, and any other information requested by the homeowner or contractor to clear up additional details.

If legal issues take place, the contract will be crucial to protect you in court.

bulletDocument All Payments

When you make a payment, document it.

If the contractor doesn’t provide a receipt, make one yourself.

Hold on to any financial forms, including checks and invoices, so that if there’s ever a payment dispute, you can provide evidence that the payments were already made.

bulletUtilize Lien Waivers

A lien waiver is an agreement that documents the payment between the payer and contractor.

If the contractor accepts the lien waiver, they are waving their right to place a lien on the property.

Lien waivers can be utilized throughout the various stages of the project, and it’s a great way to protect yourself as a property owner.

bulletMonitor Construction Progress

Keeping an eye on the progress of the construction site is an important step to make sure everything is being done as agreed upon.

Having consistent communication with the project managers will also help you resolve disputes before a mechanic’s lien is filed.

6. How Long Does a Mechanic’s Lien Stay on a Property?

Once a mechanic’s lien is filed, it will only be valid for a certain period of time.

The amount of time the lien is valid depends on each state, so it could remain valid anywhere between 90 days and two years.

However, the lien can only expire if the claimant fails to file a lawsuit within the period of validity.

If a lawsuit is filed, removing the mechanic’s lien requires the homeowner to go through the formal process of having the lien released.

Once the lien expires or is released, it’s important to quickly file a lien release to make sure that it no longer shows up on the title.

Working with a real estate lawyer will ensure that the lien is properly taken care of and that there won’t be future complications.

When you are trying to sell a property, liens are quite unattractive to potential buyers.

If you haven’t removed the lien from the title, it will add an extra step to the selling process that could have been avoided.

7. How Long Does a Contractor Have to File a Mechanic’s Lien after Completing Work on a Project?

Contractors have to file a mechanic’s lien within a certain time limit after completing a job in order for the filing to be accepted.

Usually, depending on the state, the time limit is between one and eight months after the last day work was performed–check your local laws to verify the exact time limit.

In some jurisdictions, contractors also have to file a preliminary notice to the property owners by a specific deadline.

Failing to do so could prevent the validity of the mechanic’s lien.

The courts may allow for late filings under certain circumstances.

For example, if the property owners failed to tell the contractors that the job was completed, engaged in fraudulent activity, and made false promises that resulted in the contractors not filing a lien, a late extension could be granted.

In most cases, contractors who try to submit a mechanic’s lien after the filing window has closed will be denied by the courts, and the property owners will be free of the situation.

If a contractor seeks an extension, it would be wise to seek legal counsel as soon as possible.

8. Can a Mechanic’s Lien be Filed on a Property if the Contractor’s Work is Deemed Unsatisfactory?

Deeming what is satisfactory or unsatisfactory is a subjective argument.

Just because you may not like the work doesn’t mean you have the right to not pay the contractor.

But if the contractor failed to complete the job or failed to follow through with specific requests that were put in the contract, there is very little chance that a mechanic’s lien will hold any weight in court.

That’s why it’s imperative to create a very detailed contract specifying what is expected and how payments will be made throughout the completion of the project.

9. Can a Mechanic’s Lien be Filed if the Work Was Done Without a Written Contract?

A contractor or supplier can still file a mechanic’s lien even if there is no written contract.

Verbal agreements are more than satisfactory for taking a payment dispute to court.

Any entity that has provided labor or materials to a project will be eligible to utilize a lien.

However, with no written contract that specifies payment or other terms and conditions, the entity that is filing the lien may face difficulties establishing validity.

Although not having a written contract may minimize the chances of homeowners having a mechanic’s lien placed on their properties, that’s no reason to not create a contract before the project begins.

Contracts protect homeowners by setting clear deadlines, verifying project specifications, and creating payment agreements.

So, even if you have a previous working relationship with the contractors or they suggest a contract isn’t necessary, you should still have one created and have all parties sign it.

10. What are the Steps to Remove a Mechanic’s Lien?

Removing a mechanic’s lien can be done in a few different ways.

Every situation will be different, and it would be greatly beneficial to seek legal counsel to help walk you through the process of a complicated situation.

Here are a few steps to effectively remove a mechanic’s lien:

bulletCheck the Validity of the Lien

Just because a mechanic’s lien was filed doesn’t mean it’s valid.

Check to make sure that everything was done within the time requirements and that all the claims are accurate.

An invalid lien will not hold up in court, so it’s important that you immediately do your due diligence.

bulletDiscuss a Resolution with the Claimant

When a mechanic’s lien is filed, talk with the claimant, whether it be a contractor or supplier, about finding a resolution.

Claimants typically just want to secure payment and are more than happy to work with you to avoid an outcome like foreclosure.

bulletPay the Debt

Unless the claimant decides to withdraw a mechanic’s lien, the only way to resolve the issue is by paying the debt.

This can either be done by paying the full amount owed or coming to an agreement with the claimant about a payment method.

Once the debt is paid, you can take the next steps to remove the lien from your title.

bulletFile a Lien Release

Once your debt is settled, you can then file a lien release.

Filing the release will remove the lien from your title.

To do this, you will need to provide documentation to the county clerk’s or recorder’s office that verifies the debt has been paid.

It would be wise to work with a legal professional, which will ensure that the lien is properly removed.

11. What are the Consequences of Not Paying?

The consequences of not paying a mechanic’s lien are quite severe.

If the lien is enforced, it can result in the foreclosure of your property or a sheriff’s sale–both of which mean that the property will be sold at an auction.

The sale of the property is then used to pay all outstanding debts, including a mechanic’s lien.

As the owner, you will have a redemption window to prevent this from happening.

The moment the mechanic’s lien is filed, the clock starts ticking.

So, don’t wait to learn how long you have to pay the debt to avoid having your property taken from you.

Final Thoughts

Every property owner who is hiring a contractor to complete a project should be fully aware of what a mechanic’s lien is, how to avoid it, and what to do if someone files one.

The most important thing you can do to prevent an entity from placing a lien on your home is to ensure you will, in fact, have enough money to pay for the services.

That’s why having a clear contract that specifies exactly how much you will owe is so important to protect your property and financial interests.

Remember, the laws regarding mechanic’s liens vary from state to state; read up on your local laws so that you are fully prepared.

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Erika Gokce Capital

Disclaimer: we are not lawyers, accountants or financial advisors and the information in this article is for informational purposes only. This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment decisions.

Erika

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