Mechanics Lien Understanding a Mechanics Lien Avoiding a Mechanics Lien
Explanation of a Mechanics Lien
If you plan to enlist the services of a contractor, subcontractor, or laborer to perform some work of improvement on your real or personal property, you need to know what a mechanics lien is and that a mechanics lien can be leveraged against your property for non-payment. Statutes have been put in place to protect the workers who perform works of improvement on your property in the case that they do not receive payment from you, the client. These statutes provide for a mechanics lien.
What is a Mechanics Lien?
A mechanics lien allows the person who has provided labor or material for some work of improvement to retain or place a “hold” on the object improved upon, if the owner does not pay. Mechanics liens are available to virtually anyone who provides service, labor, or materials for the improvement of real estate or personal property. That includes contractors, subcontractors, and suppliers. Homeowners should be aware that a mechanics lien may be filed against their property and know the consequences of being hit with a mechanics lien.
Policy Considerations
Public policy grants laborers who have improved upon a client’s property the ability to file mechanics liens in the case that the laborers are not paid for their services. For the skill it takes to make some improvement on real estate or personal property, it would be unfair to leave these skilled workers without a more immediate remedy than taking the offending party to court, if the workers are unpaid. The time-consuming court route could leave the laborer with a judgment that the property owner may or may not pay.
Significance of a Mechanics Lien on Personal Property
A laborer who has improved upon a client’s personal property, but has not been paid for his services, may retain that personal property. Statutes also allow that laborer to sell that personal property to recoup payment for his services. Each state has its own statutes regarding mechanics liens, so consult the statutes in your own state to determine the specifics regarding mechanics liens.
Significance of a Mechanics Lien on Real Property
When hired to perform works of improvement on real estate, contractors usually hire subcontractors and suppliers of materials. Homeowners make payment to contractors, and the contractors hold the responsibility of paying their subcontractors and suppliers. When either of the contractors, subcontractors, or suppliers do not receive payment, they may file a mechanics lien against the real estate that was improved. A lien filed against real property could result in foreclosure, double payment for the same job, or a cloud on the property’s title.
How to Avoid a Mechanics Lien
Hire only licensed contractors, and make sure that your contractors hire only licensed subcontractors. Check your contract to see that it specifies when certain aspects of work are to begin and end, and make sure it includes the names of the subcontractors and materials to be used in each aspect of work. Do a background check on your contractors and their subcontractors. Have your contractors disclose all subcontractors, suppliers, and materials to be used in the project. Pay with joint checks so that all parties must endorse the checks before payment can be released.
