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.
