Category: Mechanic’s Liens
What is a Mechanic’s Lien?
A Brief Guide
Mechanic’s liens are common legal documents in construction that require careful legal action to remain in accordance with state laws. Consequently, successful contractors should have a well-rounded understanding of the mechanic’s lien process, as these documents are instrumental in protecting your right to timely payments.
This article will briefly examine the legal fundamentals of a mechanic’s lien:
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What is a Mechanic’s Lien?
A mechanic’s lien is a document that protects the filer’s right to compensation due as part of the construction of a building or other improvement. Sometimes mechanic’s liens are also referred to as “construction liens,” and they’re typically filed by general contractors, subcontractors, and suppliers who have not received payment on a construction project. However, mechanic’s liens may be filed by any party involved in the project – save the owner.
Mechanic’s liens are effective tools as leverage to secure payments due and owing. They work by placing a lien on a property’s title and readily appear in public records. This lien (the mechanic’s lien) will remain on the property regardless of later changes in ownership. In fact, ownership changes are unlikely to even occur with a property that has a mechanic’s lien filed against it, as the lien will typically need to be paid before transfer. Banks and other lenders will hardly touch such a property.
All of this combines to create quite a powerful legal document capable of heavily incentivizing owners or contractors to pay the filer’s overdue compensation. It’s also important to note that the power of a mechanic’s lien proportionately levels the playing field between subcontractors and general contractors:
Mechanic’s Liens in Action – Subcontractors
For example, let’s say you are a subcontractor responsible for erecting the steel framework of a building on a construction project – but the general contractor hasn’t paid your last bill. Instead of going through the long and complex process of litigation, you can simply file a mechanic’s lien against the property – assuming you’ve timely executed the appropriate notices. The owners of the property will likely pressure the general contractor into compliance before resuming work, which often leads to full payment for your services. And if not, the lien can be foreclosed, meaning the property is sold at a public auction to cover the debt due to the lienholder. While foreclosure of a mechanic’s lien is rarely required, I personally conducted a foreclosure auction on the courthouse steps in a Maryland mechanic’s lien case, so it does happen on occasion!
Use an Experienced Attorney to File a Mechanic’s Lien
While the above example may have made the mechanic’s lien process seem simple, it is actually fairly complex. Furthermore, many states have laws in place that govern the specific steps one must follow to a tee in order to file a mechanic’s lien. For many states, these steps include:
- Filer must provide a preliminary notice of intent to lien X days from the date they last provided labor or materials on the project
- Filer must then file the mechanic’s lien within X days from the date they last provided labor or materials on the project
- Filer must then enforce the lien by filing a petition to enforce the lien within a predetermined timeline
NOTE: Different states have differing requirements for the mechanic’s lien process and different deadlines in which those requirements must be met. Some states have certain thresholds for the work to even be eligible for a mechanic’s lien. But in every state, a properly filed mechanic’s lien will elevate your overdue payment to the red-hot priority level, and more often than not, get you paid quickly.
If you’re looking to file a mechanic’s lien, please consider requesting a free, 15-minute consultation to learn more about your options, today.