A construction lien is more commonly known as a “mechanic’s lien”. Although it may sound like an automobile issue, mechanics liens or constructions liens have little to do with car repairs. Instead, they refer to improvements made on a property owner’s home.
A construction lien is a method used by construction contractors to ensure that the property owner will pay them for services and materials used when improving the property. If the property owner fails to pay for improvements on their home, the construction contractor can file for a construction lien to obtain payments. Basically, a construction lien authorizes a forced sale of the property in order to pay for the construction services and materials used.
Construction liens tend to focus on the party performing the construction. However, many state laws also have provisions that offer protections for the property owners as well. Construction liens are also sometimes called “materialmen’s liens”.
How do Construction Liens work?
Before a construction lien can be imposed, there must be a valid, working contract in existence between the property owner and the party or parties who will be performing the construction. Next, there must be some sort of breach of the provisions of the contract, which usually occurs when the property owner fails to make payments for the improvements.
The breach or default can cover a broad range of expenses, as long as they are directly related to the services rendered by the mechanics. For example, the property owner may fail to make payments related to painting, carpentry, plumbing, and other types of services. Thus, the title of “mechanic” also refers to persons who render these types of services, not just the contractors involved.
The aggrieved party (which is usually the mechanic or construction workers) will then have to file with a court to have the lien enforced on the property. In other words, construction liens are not an automatic right and must be specifically requested in a court in order to be enforceable.
If the construction lien is granted by the court, the property owner will usually be required to sell all or some of their property in order to meet the costs that they have failed to pay. The right to file for a construction lien can be waived under certain circumstances. If the mechanic has knowingly and voluntarily waived their right to a construction lien, they will not be able to file for one.
What are the requirements to file a construction lien?
Filing requirements for construction liens will vary from state to state. However, most state laws will require the same basic elements, such as: default on valid contract payments, prior notice to the property owner that a construction lien is being requested, recording the construction lien with a county recorded, and requesting a foreclosure action. All of these steps must be filed within the statutory deadlines.
Construction liens only apply to real property such as land, buildings, homes, condos, etc. Construction liens may not be obtained for cars or other personal property. Also, the construction lien must be requested for the item of real property where the improvements were made. For example, a contractor is not allowed to make improvements on one house and then file for a construction lien on a different house, even if the same person owns both houses.
Finally, the property owner must have consented to the work that the mechanic had performed on the property. Construction liens cannot be obtained if the contractor or subcontractor made property improvements without the owner’ consent.
What are the effects of a construction lien?
If a person has failed to make payments on property improvements, a construction lien can have severe consequences on the property owner’s title. A construction lien can result in foreclosure on the property if the owner fails to pay off the lien. It can also lead to instances of double payment, especially when dealing with multiple subcontractors.
Finally, a construction lien can constitute a “cloud” or encumbrance on the property title. This may make it very difficult to sell the property or to obtain refinancing, since the title will have a lien on it.
Do I Need a Lawyer for a Construction Lien?
Construction disputes are serious matters and can often be complex. They may involve a number of parties, such as the property owner, the general contractor, and specialized workers, many of whom legally qualify as mechanics. If you are the party requesting a construction lien, it is highly recommended that you work with a business attorney. The attorney can help you determine your rights as a contractor and can review the contract for breaches. If a construction lien has been imposed upon your property, a lawyer can help you determine what your course of action is according to the laws of your state.