A mechanic’s lien is a legal claim against a residential dwelling or other property. Mechanic’s liens are typically used by builders, contractors, subcontractors and suppliers to collect payment when they have not been paid as promised for their work in constructing, renovating or repairing property. They are a way for builders, contractors, subcontractors and suppliers to seek payment for the work they contributed to a construction project.
The mechanic’s lien was first developed by Thomas Jefferson, and the term “mechanic’s lien” comes from the fact that in the early 19th century, a construction worker was referred to as “mechanic”, a general term used to refer to people who worked with their hands.
A property owner can face a mechanic’s lien even if they are not the one who has failed to pay the contractor. For example, if a person remodels their kitchen and the general contractor does not pay the material supplier who provided the cabinetry, the material supplier can place a lien against the person’s house to recover the money they are owed. The homeowner becomes responsible for the payment when subcontractors, laborers, or suppliers are not paid.
What can be surprising to most homeowners is that it does not matter if they have already paid the general contractor for the cabinetry. If the general contractor has not paid the subcontractor or supplier, the law allows the subcontractor or supplier to seek payment from the owner of the property that was constructed, renovated or repaired. In the end, the owner may be responsible for paying for the work twice or being forced to sell their house, so it is important to understand how mechanic’s liens work and how to avoid them.
A property owner may think that it is unfair they have to pay to cover the misconduct of a general contractor. However, the rationale for mechanic’s liens is that the person who worked on the construction project or supplied material for it should be paid for their work, and the property owner has benefited from the work or the supplier’s material. Also, ultimately, the property is available to ensure payment.
The law also presumes that an owner can, in turn, sue the general contractor. While this is true in theory, this may not help the owner in the short run. A supplier could file a mechanic’s lien against a person’s house because the general contractor failed to pay them when the general contractor lost all of their money gambling. Of course, in this scenario, the owner would not be successful in recovering their payment to the subcontractor from the general contractor.
The owner can certainly file a lawsuit against the general contractor, and, over time, garnish their wages or through other legal means, attempt to collect on the debt, but this takes time and costs money. Furthermore, wringing money out of a contractor who does not pay their subcontractors and suppliers can be difficult, if not impossible. Meanwhile, the owner may owe twenty thousand dollars and have a matter of days or months to pay the supplier. If they do not pay, their property, possibly their home, can be sold to satisfy the mechanic’s lien against the property.
How Do I File a Mechanic’s Lien?
The filing requirements for a mechanic’s lien vary to some extent from state to state. In fact, In the United States, individual counties maintain and manage their own real property records. This means that a county recorder may have particular requirements regarding how a lien should be formatted so as to be acceptable. Therefore, a person may want to consult the county recorder of the county in which they intend to file their lien for guidance.
In addition, each state has specific limitations periods for the filing of liens. In some states, there are different time limitations for public and private property. For example, in New York, a lien must be filed within eight months of the date on which the last labor was performed or materials were supplied. This is the case except when the lien is filed against a single family home, in which case it must be filed within four months.
There are some common features as follows:
- Default: There must first be a payment default by the property owner or a general contractor. Then the lien filer must ensure that they are entitled to file a lien under the law of the state in which the property is located. A person may wish to consult a construction lawyer;.
- Preliminary Notice: The lien claimant must provide the property owner with written notice of the lien within a given period of time. The notice must include:
- The lien claimant’s name and address;
- The name of the person who contracted for the labor and/or services, i.e., the property owner;
- A description of the labor and/or services rendered and the estimated total price of the job;
- A description of the work site sufficient to identify it;
- Claim of Lien: The actual claim of a mechanic’s lien is a written statement signed and verified by the lien claimant that includes the same information as that given in the preliminary notice. It must be recorded with the county recorder’s office in which the relevant property is located. The period of time within which the lien must be recorded is set by statute;
- Service: The lien claimant must serve their mechanic’s lien on the property owner, so they have notice of the filing. This has to be done either at the time of filing or immediately after filing. In most cases, a lien claimant would want to take care of this at one time, i.e., file the lien, get an official copy, and deliver that copy immediately to the required recipients in the required manner.
- There are a few notable exceptions to this, such as in Pennsylvania, where a sheriff must carry out the complex service requirements of notice of the filing of a lien. This is a rather unique requirement, however. Most states require simple mail notification. Some states deem service complete when the notice is placed in the mail, while others require that the party actually receive the notice. The lien claimant must determine whether, in their state, service is complete when the lien is mailed or when it is received.
- Action to Foreclose: A foreclosure action for a mechanic’s lien is similar to a foreclosure on a mortgage. It is a lawsuit that is brought to force the sale of property to satisfy the construction debt. This action must also be filed within a certain period of time set by law.
- There are alternatives to foreclosure if the property owner and the lien filer can settle the payment of the debt without further legal action.
Each state has its own laws governing the specific types of costs that may be included when filing a mechanic’s liens. In addition, there are time constraints and statutes of limitations for filing a mechanic’s lien based on when the work was performed or when construction was completed.
Can Mechanic’s Liens Be Avoided?
There are strategies for avoiding mechanic’s liens as follows:
- Pay With Joint Checks: The property owner can write checks for payment made out to both the general contractor and a particular subcontractor or supplier. Then the checks can only be cashed if both endorse them. This helps to make sure that subcontractors and suppliers are paid;
- Get a Lien Waiver: Another way to avoid mechanic’s liens is to have the contractor put a lien waiver provision on the construction contract. This would allow the owner of the property to be relieved from paying anyone whom the contractor is responsible for paying.
- The Owner Pays: The owner can be the one to pay subcontractors and suppliers directly, deducting those payments from the general contractor’s payment.
- The downside of this approach is that it could have unwanted legal consequences. For example, the owner might appear to be the employer of the subcontractor or supplier. This would make the owner responsible for doing things such as withholding taxes and other mandatory payroll deductions. So, this is the least attractive option.
It goes without saying that a person should keep all the receipts and paperwork they receive from any contractor, subcontractor or supplier, especially notices from subcontractors or suppliers of services or materials. It may also be helpful as the project is coming to an end to follow up on those notices to determine whether the subcontractors and suppliers have been paid.
Liens on a person’s property can prevent them from getting a loan or selling their property. If there is a mechanic’s lien on a person’s property or if a person is about to have a renovation or repair made, an owner may want to consult an attorney for guidance.
Do I Need a Lawyer for My Mechanic’s Lien Issue?
The laws governing mechanic’s liens vary by state and even by county. A real estate lawyer who is familiar with your state’s construction law can help you satisfy the procedural and time requirements for filing your mechanic’s lien.
Or, if you are the owner of property on which there is a construction project that involves a general contractor and subcontractors or suppliers, you may wish to consult a construction dispute lawyer if you suspect a problem between the general contractor and the subcontractors. If a lien has been placed on your property, a construction dispute lawyer can help you determine how best to respond to it.