Mechanics Liens - What You Need to Know
March 29, 2009
A lien is a claim against a home or other real property for an unpaid debt. A mechanics lien is a specific type of claim made by someone who provided labor or materials for improving a property, such as an architect, building contractor, subcontractor or building materials supplier.
Mechanics liens exist because of the inequality of the relationship between a property owner and a tradesman. If the tradesman makes an improvement to the property and the owner decides not to pay for it, the tradesman can’t repossess the improvement. (As an example, consider a house painter.)
To compensate for this inequality, the law gives contractors and suppliers the right to file a claim against the property and force the sale of the property to pay the claim, if necessary.
Though it’s a simple concept, it can become extremely complicated because each state writes its own rules and regulations governing the creation, filing, and enforcement of mechanics liens. The specific laws vary from state to state, but the considerations are similar.
Preliminary Notice
If you sign a contract with a building contractor to add a room to your home, you’re quite aware the contractor is going to be making an improvement to your property and that you must pay him. If you don’t, he has the right to file a lien.
If your contractor buys the lumber for your room addition from the local lumberyard and charges it to his account, however, you are not aware that the lumberyard is owed for materials used to improve your home.
In theory, if the lumberyard doesn’t get paid, they can file a lien against your home, too. But that’s not fair if you were never aware. If you were aware, then you could make the contractor prove to you that he paid his lumber bill, or you could withhold part of the payment to him and pay the lumberyard yourself.
Therefore, most states require anyone who is not dealing directly with you and who may have a right to file a lien against your property to give you a preliminary notice. States typically require they give you notice within a certain time frame after they’ve begun supplying labor or materials (20 days in California, for example). In some cases, they may also be required to furnish you with an estimate of the amount they would be owed. A subcontractor or material supplier loses his lien rights if he fails to comply with any notice requirements.
When You Receive a Preliminary Notice
You can understand why some people would panic after receiving their first preliminary lien notice. Not understanding what it is, they think someone they’ve never heard of has filed a lien against their home.
Knowing that the notice is simply to inform you that someone is supplying labor or materials for your project, all you need to do is save it with other contract-related papers. When it comes time to make payment to your contractor, ask your contractor to provide you with signed lien releases from the suppliers who sent you preliminary notices. A lien release is a standard form stating that the supplier gives up his rights to file a lien against your home in connection with specific work or materials provided. Contractors, subcontractors and supply houses are very familiar with signing lien releases in connection with being paid.
If your contractor can’t provide you with signed releases, call the suppliers to find out how much they’re owed and hold back at least that much from your contractor. If necessary, pay the suppliers and get their lien releases yourself.
When a Lien is Threatened
To have a valid mechanics lien, the supplier of labor or materials must comply with any preliminary notice requirements, and record the lien within a specific time frame after completing the work or delivering materials (in California, 90 days).
In almost every case, an unpaid supplier is going to contact you requesting payment before going to the effort of filing a lien. If the supplier did not comply with any preliminary notice requirements or if the time limit for recording a lien has passed, then they are unable to file a legal mechanics lien. They can record one anyway, however, forcing you to go to court to prove the lien is invalid and to compel them to release it.
When a Lien is Filed
If a valid mechanics lien is filed against your home, the filer often has a limited amount of time to begin a lawsuit for foreclosure (90 days in California). If the time limit passes without foreclosure being started, the lien becomes invalid.
Even an invalid lien can cause you trouble when you want to refinance or sell your property. Most title companies will not give clear title to property having a recorded lien, whether valid or not. To clear the title, the filer must file an additional document called a Release of Lien.
How to Get a Lien Released
You have four ways to get a lien released:
- If the lien is valid, pay the claimant in exchange for releasing the lean.
- If the lien is invalid, threaten to sue the claimant if the invalid lien is not released.
- Actually sue the claimant in court to force them to release the invalid lien.
- If the claimant can’t be found, go to court to obtain a court decree releasing the invalid lien.
Note: This article is for information purposes and is not intended to be legal advice. Because laws vary from state to state, consult with a local attorney if you need legal help. If you need assistance finding an attorney, please contact us using the form on the right.
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