What Are Mechanic’s Liens?
Mechanic’s liens are used by subcontractors and suppliers, and they represent a legal claim against property that has been remodeled or improved.
It might sound like a simple concept, but most homeowners don’t fully understand what mechanic’s liens are and what they mean. This guide will help you understand and avoid liens.
While you read, remember that laws can vary from state to state. If you’ve had a mechanic’s lien filed against your property and you aren’t sure how to proceed, there’s no substitute for professional legal advice.
What is a mechanic’s lien?
When a subcontractor or supplier files a mechanic’s lien against a home they’re stating that they were not paid in full for the services and/or supplies rendered.
For example, assume you hired a general contractor (GC) for a home remodeling project. They hire a roofer to come out and fix your old roof, but that roofer never gets paid by the GC. Even though you’ve paid your GC, the roofer can still file a lien against your newly improved property.
What happens if a mechanic’s lien is filed on my home?
If a mechanic’s lien is filed against your property a few things can happen:
- Double payment for the same job if you have to pay the subcontractor or supplier but you’ve already paid your GC.
- Foreclosure is a possibility if the lien isn’t paid off.
- An impact on the property’s title, because the lien will be recorded. This can impact your ability to sell or refinance, among other implications.
How mechanic’s liens are filed
While the laws can vary by state there’s a general process that occurs when a lien is filed against your home.
According to FindLaw, the subcontractor or supplier must first give you notice of what was contributed to the improvement of the home. This should happen 20-30 days after the “contribution”. If they aren’t paid they have to file a “claim of mechanic’s lien” in the county where the property is located.
After the claim is filed the subcontractor or supplier generally has anywhere from two to six months to come to a solution or file a lawsuit.
Avoiding mechanic’s liens
Now that you know more about the process behind mechanic’s liens, you’re probably keen to avoid them. Here are some steps that you can take:
- Get lien waivers. You can have your contractor get lien waivers from every sub and supplier.
- Write checks to both parties. If you write out joint checks to both your GC and their subcontractors/suppliers, both parties will need to sign those checks. This ensures that everyone gets paid fairly.
- Pay subcontractors and suppliers yourself. This option might sound like the easiest and most straightforward way to avoid liens, but it should be your last choice. When you pay these people yourself it sets you up as an employer, meaning you’ll also have all of the tax implications of paying employees.
- Do your research. This last piece of advice is perhaps the most important — do your research before hiring anyone to do work on your home. If a contractor, subcontractor, or supplier has a history of filing mechanic’s liens there will be a record at your local courthouse. If there’s a history of court cases and liens you should consider hiring someone else.
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