If you’re not familiar with mechanic’s liens, they are a legal claim that work or materials were provided to a house and that work is not yet paid. They are filed by contractors who worked on a construction project as a security interest the help ensure payment for work performed. The purpose of a mechanics lien is to protect the contractors, laborers, material suppliers, and others who worked on a construction project from non-payment on the part of the property owner. After all, if you built a beautiful deck, it’s somewhat difficult to repossess it.
How Does a Mechanics Lien Work?
If someone who worked on a project on a house remains unpaid after a certain period of time, which is set by state law, then they begin the process of filing a mechanics lien, effectively saying that they have a right to a portion of the value of the property. This is generally an issue for the property in the event of a sale, lease, or foreclosure of the property. Before someone buys a new house, they check the title to make sure it’s free of claims or that the claims on the property can be settled by the purchaser. The more claims against the title, the less attractive it is for a potential purchaser. This is a strong motivation for property owners to settle any mechanics liens.
If the lien on the house remains unpaid, then the lien holder has a right to foreclose on the property, which means that the court will order that the property be sold and the lien holder will then collect the value of their lien from the sales. If there are a number of liens against a piece of property, the court assigns priority to different lien holders by state law and pays them going down that list. A mortgage holder for the property is another example of someone who may get paid in the event of a foreclosure.
Who Can File a Mechanics Lien on a Home?
The exact statute varies from state to state, but in general, anyone who supplied labor or materials to a construction project is eligible to file a mechanics lien. This means contractors, equipment rentals, laborers, and building supply companies. In some states, engineers, surveyors, landscapers, and architects are even able to file liens. Before you start a construction project, look up the laws for the specific state you’re working in. You want to make sure you’re eligible to file a lien. You also want to ensure that you’re licensed to do work in that state if your profession requires a license as that could affect your eligibility.
How Can You Remove a Mechanics Lien?
If your house has a mechanics lien filed against it, there are some steps you can take to get the lien removed. First, check to see if the lien is valid. Look at your state’s lien laws to ensure:
- That you received any necessary notice,
- That the lien was filed by someone eligible to file a lien,
- That it was recorded in a timely fashion,
- That it was recorded properly, and
- If the lien has expired without any further action.
Most liens expire after a period of time, so the lien may be out of date. If any of these are true and the lien is invalid, you can send a demand letter to the contractor that requests release from the lien. This needs to be sent via certified mail, return receipt requested. If this isn’t effective, you may need to file a legal proceeding to declare the lien invalid and recover damages. When your demand letter isn’t effective, it is probably time to hire an attorney to help you remove the lien.
How Can You Prevent Mechanics Liens Against Your House?
Of course, the best way to prevent a mechanics lien filing against your house is to be proactive about keeping track of who is working on your project and make sure they’re paid. If you’re hiring a general contractor, ask for a list of all subcontractors and suppliers they are hiring to complete your construction project. You can then request lien waivers from everyone working on the project. In some states, you can also file a notice of commencement on your project, which shortens the window in which liens can be filed.
Lien waivers are common in the construction industry and serve as part receipt for payment provided and part legal document saying that, once payment is tendered, a lien will not be filed. This lessens your exposure and provides documentation in the event there is an issue.