What Is A Mechanic's Lien And How Does It Work?
A "mechanic's lien" on a building project is something you may have heard of. What exactly is this document, and how does it impact your legal rights?
If you work in construction, either as a contractor or as a property owner, you've probably heard of a "mechanic's lien." These are frequently referred to as "construction liens" or "property liens" depending on where you reside. What exactly are mechanic's liens, and how do they influence your legal rights?
Mechanic's Liens: What They Are and How They Work
Mechanic's liens, despite their name, having little to do with mechanics. Instead, they are legal contracts that basically reserve a person's right to claim reimbursement if the person who commissioned them to conduct work does not pay them. Contractors, subcontractors, and suppliers who never got payment for a job they performed or supplies they delivered on someone's house, land, or other real property frequently file these liens.
Assume you are a homeowner who has hired a contractor to construct a new swimming pool in your backyard. He completes all of the essential tasks and constructs a stunning pool. However, you refuse to pay the last $5,000 on the contract amount at the end of the job. Of course, the contractor has the right to sue you for breach of contract. However, the contractor has another option under the lien laws: filing a mechanic's lien against your property.
Mechanic's liens show in public property records and put a cloud on title. Liens are commonly referred to as "traveling with the land," which means that anyone who purchases your home will do so subject to the contractor's lien (or, more likely, demand that you pay it off first).
In practice, this makes it exceedingly unlikely that you will be able to sell your house until any existing liens are paid off or otherwise dealt with. Similarly, banks and lenders are usually reluctant to refinance houses or lend against liens-encumbered property. You'd have to pay the lien off one way or the other, or come to an agreement with the filer to have the lien cancelled.
Liens are a pain for homeowners for all of these reasons. Contractors, subcontractors, and suppliers, on the other hand, gain significant power.
Subcontractors' and Suppliers' Mechanic Liens
A lien can be filed by anybody, not just general contractors like the pool installation. This remedy may be available to subcontractors and suppliers as well. Consider the case where the pool constructor hired a concrete subcontractor to pour the pool's base concrete. The subcontractor would have no agreement with the property owner; instead, she would have an agreement with the general contractor.
What happens if the subcontractor is never paid by the general contractor? She might file a breach of contract lawsuit against the general contractor. She can, however, place a lien immediately on the owner's property. This provides her some clout, because the homeowner will be notified of the lien right away, putting pressure on the general contractor to correct the mistake and eliminate the lien. These lien laws were enacted with the intent of encouraging settlement and ensuring that workers receive their just pay.
Items That Can Be Included in a Lien's Amount
The amount claimed under a lien does not have to include all charges. Contractors can usually only file a lien for labor, materials, and services that they provided that benefited the real property, however the requirements vary by state.
The value of the concrete, equipment rental charges, and hourly time rates for services might all be included in the subcontractor's lien in the case above. She couldn't include, for example, her attorneys' costs for filing the lien since they didn't add to the property's worth. She couldn't add sums for punitive damages, mental anguish, or any qualitative damages, either. The amount of a lien must, in general, be restricted to the actual expenses of the land or property development.
The Importance of Local Law in the Case of Mechanic Liens
While many legal papers appear to be the same in every state, mechanic's liens are extremely state-specific. Individual counties in the United States are normally in charge of their own property records. This implies that various county clerks may have quite specific requirements for how liens should be prepared in order to be approved.
Furthermore, each state has its own statute of limitations for filing liens. In certain countries, the time limit for private and public property is different. In New York, for example, a lien must be filed within eight months after the final labor or material, unless the lien is against a single family house, in which case it must be filed within four months.
Because of tiny differences like this, it's critical to think about local law and practice. Before attempting to file a lien on your own, you should consult with a local attorney, preferably one that specializes in construction law.