How Do Mechanic’s Liens Work?

 

Written by Ashley Sutphin Posted On Monday, 27 March 2023 00:00

 

A mechanic’s lien has nothing to do with a mechanic, so the name can be a little misleading. Instead, these are legal claims that a contractor, subcontractor, or supplier can place against a property if they haven’t gotten paid for work they’ve done. If someone is working on remodeling or building a house, a mechanic’s lien is a form of recourse to protect themselves and ensure they get paid.

For a homeowner, unfortunately, a mechanic’s lien can be placed on their house even if they make all the necessary payments. If you, for example, have a general contractor who doesn’t pay their supplier or subcontractor, that person can put a lien against your house to get their money.

When you’re the homeowner, you can become responsible for the payments if anyone’s not paid.

You might have paid your general contractor for something, only to have them not pay a subcontractor or supplier the money you gave them. It doesn’t matter because typically, under the law, you can be responsible if something isn’t paid involving the property that was improved.

The Process of a Mechanic’s Lien

State law requires subcontractors or suppliers to take certain steps to get a mechanic’s lien. The claimant has to notify you if you’re the homeowner of what they’re contributing, usually within 20 to 30 days of the contribution being made. For example, if you’re remodeling your bathroom, maybe the supplier gives you notice that they’re providing the materials for a new shower.

Then, if the subcontractor or supplier doesn’t get paid, they file a claim for a mechanic’s lien in the county where your house is. From there, the subcontractor or supplier has two to six months, in most instances, to try to come up with a solution with you as the homeowner, or they can file a lawsuit.

Most states won’t let the subcontractor or supplier take further action if the lawsuit is not filed within a particular window. Even if there’s not a lawsuit, you still should clear the lien from your property through a court order because it can be hard to sell it later on if you don’t.

Isn’t This Unfair?

One of the biggest questions homeowners often have about mechanic’s liens is how they’re even allowed. It can seem incredibly unfair to have to pay more because you have a general contractor who doesn’t do what they’re supposed to and isn’t paying people.

Unfortunately, the legal theory is that you have the improved property, so the needs of paying the person who did the work to improve it are the priority.  

There’s also a presumption under the law that you can sue the general contractor if you face a situation like this.

While that holds in the long term, it might not benefit you in the short term. It does take time and money to file a lawsuit against a general contractor, and sometimes they don’t have sufficient assets to cover whatever your judgment might end up being.

Can You Avoid Mechanic’s Liens?

If you know the risks of having a mechanic’s lien against your home, you can proactively prevent it.

• You can write out checks jointly to your general contractor and specific suppliers or subcontractors, meaning they can only be cashed if both endorse them.
• You can get a lien waiver, which the contractor can put into your contract. This means you aren’t responsible for paying whoever the contractor should pay.
• You can directly pay subcontractors and suppliers and then deduct these payments from what you end up paying your general contractor. This isn’t the best option, though, because it puts you into an employer role, and you’d have to deal with withholding taxes.

 

Whenever you hire a contractor, keep up with all your contracts, paperwork, receipts, and notices of services or goods that go toward your project. You may need them if you’re going to follow up and make sure everyone got paid.

While it’s less common, a general contractor can also file a mechanic’s lien in most states, but they’ll have to follow the same processes as subcontractors or suppliers.

If you have a lien on your property, you could be prevented from taking out a loan on it or selling it. If you’re in a situation where you already have a mechanic’s lien against your property, you should likely talk to a real estate attorney. You could even consult a legal professional before hiring a contractor to do any work on your home to ensure you’re protected in the best ways possible.