The Mechanics’ Lien law provides special
protection to contractors, subcontractors, laborers and suppliers who furnish
labor or materials to repair, remodel or build your home.
If any of
these people are not paid for the services or materials they have provided, your
home may be subject to a mechanics’ lien and eventual sale in a legal proceeding
to enforce the lien. This result can occur even where full payment for the work
of improvement has been made by the homeowner.
The mechanics’ lien is a
right that a state gives to workers and suppliers to record a lien to ensure
payment. This lien may be recorded where the property owner has paid the
contractor in full and the contractor then fails to pay the subcontractors,
suppliers, or laborers. Thus, in the worst case, a homeowner may actually end up
paying twice for the same work.
The theory is that the value of the
property upon which the labor or materials have been bestowed has been increased
by virtue of these efforts and the homeowner who has reaped this benefit is
required in return to act as the ultimate guarantor of full payment to the
persons responsible for this increase in value. In practice, a homeowner faced
with a valid mechanics’ lien may be compelled to pay the lien claimant and then
pursue conventional legal remedies against the contractor or subcontractor who
initially failed to pay the lien claimant but who himself was paid by the
homeowner. Another justification for this result relates to the relative
financial strengths of the parties to a work of improvement. The law views the
property owner as being in a better situation to absorb the financial setback
occasioned by having to pay the amount of a valid mechanics’ lien, as opposed to
a laborer or material man who is viewed as being less able to absorb the
financial burdens occasioned by not being paid for services or materials
provided in connection with a work of improvement.
The best protection
against these claims is for the homeowner to employ reputable firms with
sufficient experience and capital and/or require completion and payment bonding
of the construction work. The issuance of checks payable jointly to the
contractor, material men and suppliers is another protective measure, as is the
careful disbursement of funds in phases based upon the percentage of completion
of the project at a given point in the construction process. The protection
offered by mechanics’ lien releases can also be helpful.
Even if a
mechanics’ lien is recorded against your property you may be able to resolve the
problem without further payment to the lien claimant. This possibility exists
where the proper procedure for establishing the lien was not followed. While it
is true that mechanics’ liens may be recorded by persons who have provided
labor, services, or materials to a job site, each is required to strictly adhere
to a well-established procedure in order to create a valid mechanics’ lien.
Needless to say, this is one area of the law that is very complex, thus
it may be worthwhile to consult an attorney if you become aware that a
mechanics’s lien has been recorded against your property. In the event you
discover that a lien has been recorded but no effort has been made to enforce
the lien, a title company may decide to ignore the lien. However, be prepared to
be presented with a positive plan to eliminate the title problems created by
this type of lien. This may be accomplished by means of a recorded mechanics’
lien release from the person who created the lien, or other measures acceptable
to the title company.
As in all areas of the real estate field, the best
advice is to investigate the quality, integrity, and business reputation of the
firm with whom you are dealing. Once you are satisfied you are dealing with a
reputable company and before you begin your construction project, discuss your
concerns about possible mechanics’ lien problems and work out, in advance, a
method of ensuring that they will not occur.