Answering Your Questions About Mechanic’s Liens
Mechanic’s liens can cause huge headaches for real property owners, often resulting in foreclosure or an owner paying double for construction services. Before embarking on a construction or remodeling project, property owners should understand why these claims are filed and what can be done to prevent them.
Q. What is a mechanic’s lien?
A. A mechanic’s lien is a protest that a worker files when they haven’t been paid for their work. These “holds,” as they are commonly called, can be filed by anyone who did work on your property: contractors, subcontractors, workers and even suppliers of materials. It’s basically a right for workers to request compensation. The mechanic’s lien exists to protect the rights of workers and ensures that they are paid for the jobs they do, even if circumstances surrounding the project change or managers change.
Q. Why are mechanic’s liens necessary?
A. When a property owner makes improvements to their property, often they are not directly hiring a whole slew of workers. Instead, what usually happens is that the homeowner hires a main contractor who coordinates all the hiring for all the jobs needed to be done on the property.
Sometimes general contractors change in the midst of a project and leave workers unpaid. Other times, mechanic’s liens pop up long after a project has been completed.
Q. What problems can mechanic’s liens cause?
A. Mechanic’s liens can result in foreclosure, double payment for services rendered, or a lien on the property title that will affect the owner’s ability to refinance, sell, or borrow against the property.
Q. Can these claims be prevented?
A. Yes, with due precaution before and throughout projects. Consider these four steps to prevent unnecessary mechanic’s liens.
- Before starting construction, property owners should only hire contractors with great reputations. Always check the licensing of contractors before hiring them. Similarly, make sure your main contractor hires licensed subcontractors. Ask your general contractor for a list of all their subcontractors, workers and materials suppliers. Also, agree upon a written contract with time periods for work, prices, and workers all listed and defined.
- Once construction has begun, monitor the work to make sure things are being done as agreed. Contractors and subcontractors are required under law to provide pre-lien notice in most circumstances in order to preserve their mechanic’s lien rights. If pre-lien notice is not provided and not done so in strict compliance with the pre-lien statute, you have a complete defense to the enforcement of the mechanic’s lien.
- When paying workers, pay with joint checks. This is when both parties endorse the check. This is extra accountability and ensures awareness of who is getting paid.
- Within 15 days of the completion of the contract, demand that any party having a lien furnish an itemized account of the lien, the total amount due, and the full name and address of the lien claimant. Lien claimants may not enforce their lien through legal action until this information is provided.
Attorneys who understand construction law can greatly aid homeowners and contractors alike who are confronted with real estate law issues. The rules and regulations surrounding mechanic’s liens are complicated. Real estate lawyers can help guide both property owners and construction workers through the process, ensuring correct filing procedures and protecting the rights of everyone involved.
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This website features educational information based on general legal principles in Minnesota. Specific legal advice is contingent upon the unique facts of each case. Therefore, you should not rely only on this information for your particular legal issue. Contact an attorney to obtain advice specific to your legal situation.