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Common Questions about Mechanic’s Liens

Mechanic’s liens can cause huge headaches for real property owners, often resulting in foreclosure or double payment to contractors. 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 guarantee of payment that contractors file against an owner’s property when they haven’t been paid for their work. These “holds” can be filed by anyone who did work on your property: contractors, subcontractors, workers and even suppliers of materials. The mechanic’s lien protects the rights of contractors and ensures that they are paid for the work they do, even if circumstances surrounding the project change or managers change.

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 three steps to prevent unnecessary mechanic’s liens.

  1. 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 (a/k/a/ general contractor) hires licensed subcontractors. Ask your general contractor for a list of all their subcontractors and materials suppliers who will be involved on the project. Also, enter into a written contract with the general contractor that sets forth important terms, including time periods for work, prices, the exact scope of work to be performed, and a dispute resolution process.
  2. 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.
  3. When paying the general contractor, request lien waivers from those subcontractors who have performed work related to the payment. If you obtain a valid lien waiver from the subcontractor, or if you pay the general contractor in full before receiving the notice from the subcontractor, you cannot be forced to pay for the services or material a second time if the contractor fails to pay the subcontractor. If you pay the subcontractor directly, be sure to get a lien waiver from the subcontractor. Also, for 120 days after all work is completed, you have the right to withhold from the contractor as much of the contract price as is necessary to pay subcontractors unless the contractor has given you lien waivers signed by the subcontractors.

Attorneys who understand construction law can greatly aid homeowners and contractors alike who are confronted with mechanic’s liens. The rules and regulations surrounding mechanic’s liens are complicated. Construction law attorneys can help guide both property owners and contractors through the process, ensuring correct filing procedures and protecting the rights of everyone involved.