Every homeowner is susceptible to mechanics liens and some may not even know what they are or how it happened. First, you should choose a licensed and bonded contractor, rather than someone with a small line ad in the newspaper or a person advertising their business on a phone pole flyer. Otherwise you might end up with a lien filed against your property out of the blue! How do you protect yourself and your home? Here are some points that will save you time and money!
What exactly are mechanics liens?
When you hear mechanics liens you may think it has something to do with repairing your automobile. But interestingly the term was created in the 1800’s when laborers were referred to as “mechanics.” In basic language it is when a contractor who has performed labor or supplied materials to a project has been left unpaid, which allows him to file a lien against the title of the property. It was initially created to ensure payment to contractors that were building cities and had no means of pursuing payment when a project failed.
Each state has different laws and procedures with regards to mechanics liens. The state requires the lien be placed against the title to the real property at which the services have been performed by the contractor. Filing a mechanics lien can be difficult, especially against a residential property. Some states require that additional steps be performed before a lien can be placed but some merely allow a contractor to lien without going to court to win a judgement first.
What happens when a lien is filed against my property?
A lien that is filed against your property can result in a forced foreclosure in order to satisfy the lien. This will normally occur if the owner refuses to pay or is unable to pay due to loss of funding. A lien can affect a pending sale of your home by reflecting negatively on your diligence or honesty. It would not prevent a sale from proceeding, since the lien would be paid from the escrow proceeds. In a foreclosure, the mechanics lien would take a back seat position to the mortgages, taxes and any other government liens.
A lien can also result in your having to make a double payment for the same job. The subcontractors and suppliers are allowed to file a lien against the property if they did not receive payment by the general contractor. Even if you have paid the primary or general contractor, you could still be liable to lien if that contractor doesn’t pay his subs. Mechanics liens can affect the homeowner’s ability to sell, borrow against or refinance the property.
How can I prevent a mechanics lien?
The easiest way to prevent a lien is to be sure that you are hiring licensed contractors. Be certain that your contractor is also hiring licensed subcontractors and suppliers to work under him. You can also double check with the courthouse to see if there are any lawsuits currently against a contractor or subcontractor, and whether they have any complaints for non-payment of their workers. You should also check with the contractors licensing board in your city to make sure the contractor you are hiring has no unsatisfied complaints against them.
You will want to document everything with your workers before beginning a project. Be sure to have a list of all subcontractors involved with the project from workers to suppliers. Require that the contractor give you a written change order for any revisions to the original plan, with respect to supplies and labor.
When you are paying your contractors use a check only, you may even want to make it payable both the contractor and other party, i.e. the painter or flooring supplier, so that two signatures are needed to endorse your check. This will ensure payment of the sub contractors. When you make a payment have the payee sign a waiver that releases you from any further responsibility or liens. You can download a general waiver and release form on the Internet.
Check with your state regarding their specifics with respect to mechanics liens. Some states will require that you follow a process that will help to protect you and the laborers you contract with. In short, be diligent about anyone you hire to do work on your home or business. Know the laws and processes in your state just in case you run into an issue. Hire licensed individuals, they may cost more but remember they are more accountable.
Audrey Summers is a design consultant and content contributor for cliqstudios.com, a kitchen makeover site featuring hundreds of choices for storage such as discount kitchen cabinets as well as a blog with ideas for design, restoration and food preparation.
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