Mechanic's liens: when and how should you file one?

You've performed the job, but the owner of the home has yet to pay you. You consider filing a mechanic's lien against the owner of the project because if you do, the owner won't be able to sell or refinance the property until the they pay the participating contractors their disputed debts.

Mechanic liens are a friend of contractors, subcontractors and others in the construction industry to resolve payment disputes. To file a lien, the contractor, subcontractor of other construction entity must provide preliminary notice within the state-regulated time frame. Many states require contractors provide the owner a 20 day minimum preliminary notice before they put a lien on the home, but the time allotted varies by state. Another name for a preliminary notice, is a "Notice of Intent." This notice must be provided to the property owner, general contractor (the one who oversees the project), and the lender.

Though the process varies, the filing of a mechanic's lien is available to nearly anyone who performed labor, service and/or materials to a real estate improvement project. The main caveat, is that the contractor or sub filing the lien must be licensed for the lien to be valid. If not, the lien is invalid. Also, mechanic's lien laws are only available to suppliers if they supplied materials directly to the project.

Stop Notices

A stop notice will put a freeze on the remaining construction funds, so that those remaining funds will go directly to the claimants who field a lien. You may not recover everything, but these steps allow you to recover a good portion of what your owed.

Enforcing the lien

All states require the claimant to file a court action to enforce the lien within an established time-frame. If the established time passes without the claimant taking action, the lien is now invalid.

Other details

Lien laws differ from state to state, so if you have pressing questions, it would be wise to consult with a lawyer knowledgeable inĀ construction disputes. Also, sometimes all property owners could be held responsible for paying out a portion of the claim.

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