Mechanic's Liens

 

The Mechanics’ Lien law provides special protection to contractors, subcontractors, laborers, and suppliers who furnish labor or materials to repair, remodel, or build your home. If any of these people are not paid, your home may be subject to a mechanics’ lien and eventual sale in a legal proceeding to enforce the lien. This can occur even when the homeowner has made full payment for the work.

The Risk of Double Payment

The mechanics’ lien is a right that a state gives to workers and suppliers to record a lien and ensure payment. This lien may be recorded where the property owner has paid the contractor in full and the contractor then fails to pay the subcontractors, suppliers, or laborers. Thus, in the worst case, a homeowner may actually end up paying twice for the same work.

The theory is that the property's value has been increased by these efforts, and the homeowner, who has reaped this benefit, is required to act as the ultimate guarantor of full payment. In practice, a homeowner compelled to pay the lien claimant must then pursue conventional legal remedies against the contractor who initially failed to pay.

Best Practices for Protection

The best protection against these claims is for the homeowner to employ reputable firms with sufficient experience and capital and/or require completion and payment bonding of the construction work. Other protective measures include:

 

• The issuance of checks payable jointly to the contractor, material men, and suppliers.
• The careful disbursement of funds in phases based upon the percentage of completion of the project.
• The protection offered by mechanics’ lien releases.

Resolving a Recorded Lien

Even if a mechanics’ lien is recorded against your property, you may be able to resolve the problem without further payment if the proper procedure for establishing the lien was not strictly followed. This area of law is very complex, so it may be worthwhile to consult an attorney if you become aware that a mechanics’ lien has been recorded against your property.

If a title company discovers a recorded lien, they will likely require a positive plan to eliminate the title problem. This may be accomplished by means of a recorded mechanics’ lien release from the person who created the lien, or other measures acceptable to the title company.

The best advice is to investigate the quality, integrity, and business reputation of the firm with whom you are dealing. Before you begin your construction project, discuss your concerns about possible mechanics’ lien problems and work out a method of ensuring that they will not occur.