Mechanic’s Lien

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mechanic’s lien is a formal notice, filed with a court of appropriate jurisdiction, indicating a financial interest in a property. Sometimes referred to as a contractor’s lien or a construction lien, this form details money owed to the contractor for either services rendered or materials provided on a construction or home or building improvement project.

First sponsored in the United States by Thomas Jefferson to encourage construction in the new capital city of Washington, the ability to file one provides some security to builders and artisans. Without one, they may otherwise find themselves without recourse, should the property owner fail to pay their bill.

Practically speaking, a builder or artisan cannot go back to a property and remove the structure they built or the paint they applied to the walls if they don’t get paid. A mechanic’s lien on the property, however, preserves their claim for payment.

If the owner doesn’t pay the bill before they sell the property, the lien will be addressed at the time the property is sold. Additionally, a lien owner may force the sale of the home to satisfy the lien.

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When Do I Need a Mechanic’s Lien Form?

Construction workers at their job site
If you’re a builder or artisan, you should look into whether creating a Mechanic’s Lien would be of benefit to your business.

First, you must have provided goods or services in the construction or improvement of real property. Different states have different rules about what constitutes appropriate work for a mechanic’s lien, however, generally speaking, the following work and contractors, if gone unpaid, may qualify for one:

  • The provision of goods, such as lumber, plumbing supply, or electrical equipment;
  • Labor, such as carpenters, plumbers, electricians, laborer’s, mechanical/HVAC contractors, etc.;
  • Designers such as civil engineers and architects who were involved in the plans and specifications of the work; and
  • Fabricators of specialty items later installed or incorporated into the project.

Second, the work must be unpaid. If you have provided goods or services to enhance real property, and your bill has not been paid, this form is an appropriate remedy.

Consequences of Not Having a Mechanic’s Lien

Engineer and client looking on project on the construction site
Sometimes, things don’t go according to plan, and you could be left high and dry. That’s why it’s important to have some form of legal protection in place – like a Mechanic’s Lien.

Without one, a contractor runs the risk of not being paid for work performed or services provided. When a property owner doesn’t pay a bill for work done on the property, the mechanic’s lien gives the contractor a security interest in the property and preserves the claim for payment.

When the property is sold, the proceeds will be divided among the various security interest holders, including first and second mortgages, tax liens, Homeowners Association (HOA) dues, and other construction liens, in the order of priority.

Any money over and above those debts will go to the property owner. However, without this form, the contractor will have no claim to the proceeds of the sale, and there is no guarantee the funds due and owing will ever be paid.

Contractors should be cautious not to fall into a false sense of security about a mechanic’s lien. For a lien to be legal, it must be perfected. Each state has its own requirements for how to perfect a construction lien. However, generally, the following steps must be taken for a contractor’s lien to be valid:

  1. First, in some states, the contractor must provide notice to the property owner that money is owed;
  2. Some states also require notices about the beginning of the work on the property and/or a public notice of the intention to file the lien if it remains unpaid;
  3. Next, all states require a notice or claim of the lien to be filed in the requisite public records office. This notice must be filed within a specific period after either the work was completed or the materials were supplied;
  4. Finally, the contractor must file suit to foreclose the lien within a specific period of time as dictated by state law.

Common Situations for Using a Mechanic’s Lien Form

This form is designed to protect contractors who, by their products or services, enhance the value of the property. Consequently, they are most commonly used in new construction or improvements to property.

Of note, not every cost associated with a project is subject to this form. For example, a contractor may bring in laborers to replace the roof of a home. The contractor is entitled to a mechanic’s lien for the cost of the shingles and other building materials, as well as the labor costs for the workers who tear off the old roof and install the new roof.

However, the cost of the rental of a portable latrine, or the installation and removal of a security fence, while perhaps necessary for the comfort and safety of the workers, may not be subjected to a mechanic’s lien. This is because the latter does not increase the value of the property, while the new roof does.

Of course, there are exceptions to the “first in time” rule. For example, a tax lien typically takes precedence over a mechanic’s lien. Additionally, Homeowner’s Association assessment liens may take precedence. Similarly, this lien may take precedence over some other, previously recorded liens, depending on the state.

What Should Be Included in a Mechanic’s Lien?

As each state has its own mechanic’s lien laws, there will be some variation in what should be included in a lien. However, the table below seeks to address each topic contemplated by all the states, for ease of use.

Specification: Mechanic’s Lien

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