Why Mechanics’ Liens are Valuable Tools for Contractors

Why Mechanics’ Liens are Valuable Tools for Contractors

Mechanics’ liens are tools used by contractors to obtain payment owed for a project. If this type of lien is filed against the owner of a project, that individual will not be able to refinance or sell the property before paying off the disputed amount. When used properly, this lien is a great form of payment insurance for a licensed contractor.

Issuing A Preliminary Notice
Contractors or subcontractors who do not have contractual relationships with a project owner must give preliminary notice within the allotted time limit. In most states, the time limit is 20 days before filing the lien. In addition to giving the owner a preliminary notice, the serving party must provide the general contractor and lender with a copy. A detailed bill and statement outlining every service performed must also be provided by the contractor.

The Filing Process
This process differs from one area to the next. These liens are available to nearly any person who provides services, labor or materials for a construction project. It is important to remember that a lien is meant to gather payment from the property itself instead of the owner’s personal funds. If necessary, a contractor may take the owner of the property to court to enforce payment. When such a judgment is upheld, the court will order the property to be sold at auction to satisfy the lien.

The lien must be recorded in a timely manner at a state or local office in the county where the named property is located. If the contractor who is filing the lien does not have a license, the document will be considered invalid. The law is also not available to suppliers providing materials to other parties instead of providing them directly to the project site.

Issuing Stop Notices
These notices are not available to claimants who have a direct contractual relationship with a project owner. When issued, a stop notice will apply against the amount that has not been paid by the project owner. The funds are frozen to allow the lender or owner to issue the proper amount to the unpaid workers.

Revoking A Stop Notice Or Lien
After a lien has been recorded, a court action must be filed by the claimant to enforce the lien. This must be done within the established time limit. If no action is filed within the allotted time, the lien is considered invalid. However, there are many title companies that do not acknowledge this fact, which means the lien must be removed before a clear title can be issued to the next buyer. The simplest solution for clearing a lien is to ask its holder to file a release form. If the holder refuses to do this, the liable party may ask the court to remove the lien on the property.