Mechanic’s Liens

The Mechanics’ Lien law provides special protection to contractors,

subcontractors, laborers and suppliers who furnish labor or materials to

repair, remodel or build your home.

If any of these people are not paid for the services or materials they have

provided, your home may be subject to a mechanics’ lien and eventual sale in a

legal proceeding to enforce the lien. This result can occur even when the

homeowner has made full payment for the work of improvement.

The mechanics’ lien is a right that a state gives to workers and suppliers to

record a lien and ensure payment. This lien may be recorded where the

property owner has paid the contractor in full and the contractor then fails to

pay the subcontractors, suppliers, or laborers. Thus, in the worst case, a

homeowner may actually end up paying twice for the same work.

The theory is that the value of the property upon which the labor or materials

have been bestowed has been increased by virtue of these efforts and the

homeowner who has reaped this benefit is required in return to act as the

ultimate guarantor of full payment to the persons responsible for this increase

in value. In practice, a homeowner faced with a valid mechanics’ lien may be

compelled to pay the lien claimant and then pursue conventional legal

remedies against the contractor or subcontractor who initially failed to pay the

lien claimant but who himself was paid by the homeowner. Another

justification for this result relates to the relative financial strengths of the

parties to a work of improvement. The law views the property owner as being

in a better situation to absorb the financial setback occasioned by having to pay

the amount of a valid mechanics’ lien, as opposed to a laborer or material man

who is viewed as being less able to absorb the financial burdens occasioned by

not being paid for services or materials provided in connection with a work of

improvement.

The best protection against these claims is for the homeowner to employ

reputable firms with sufficient experience and capital and/or require

completion and payment bonding of the construction work. The issuance of

checks payable jointly to the contractor, material men and suppliers is another

protective measure, as is the careful disbursement of funds in phases based

upon the percentage of completion of the project at a given point in the

construction process. The protection offered by mechanics’ lien releases can

also be helpful.

Even if a mechanics’ lien is recorded against your property you may be able to

resolve the problem without further payment to the lien claimant. This

possibility exists where the proper procedure for establishing the lien was not

followed. While it is true that persons who have provided labor, services, or

materials to a job site may record mechanics’ liens, each is required to strictly

adhere to a well-established procedure in order to create a valid mechanics’

lien.

Needless to say, this is one area of the law that is very complex, thus it may be

worthwhile to consult an attorney if you become aware that a mechanics’ lien

has been recorded against your property. In the event you discover that a lien

has been recorded but no effort has been made to enforce the lien, a title

company may decide to ignore the lien. However, be prepared to be presented

with a positive plan to eliminate the title problems created by this type of lien.

This may be accomplished by means of a recorded mechanics’ lien release

from the person who created the lien, or other measures acceptable to the title

company.

As in all areas of the real estate field, the best advice is to investigate the

quality, integrity, and business reputation of the firm with whom you are

dealing. Once you are satisfied you are dealing with a reputable company and

before you begin your construction project, discuss your concerns about

possible mechanics’ lien problems and work out, in advance, a method of

ensuring that they will not occur.