Mechanic's Liens

Mechanic's Liens

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 when the homeowner has made full payment for the work of improvement.

The mechanics’ lien is a right that a state gives to workers and suppliers to record a lien and 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 persons who have provided labor, services, or materials to a job site may record mechanics’ liens, 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’ 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.

People also read

Credit purchase

Why You Should Not Make Any Major Credit Purchases

Why You Should Not Make Any Major Credit Purchases Don't go on a spending spree using credit if you are thinking about buying a home, or in the process of ...
Read More
Property Lien

Creative Financing

Creative Financing Creative financing: You've heard of it, and, as a seller, the idea sounds pretty attractive. But, do you know everything you need to know about carrying back a ...
Read More
Handing over keys

Common Ways of Holding Title

Common Ways of Holding Title How Should I Take Ownership of the Property I am Buying? Real property can be incredibly valuable and the question of how parties can take ...
Read More
savings for down payment on a house

Your Savings and Down Payment

Your Savings and Down Payment Your First Step Toward Buying a Home When preparing to buy a home, the first thing many homebuyers do is look at the real estate ...
Read More
escrow

Title Insurance Requirements for Insuring Trusts

Title Insurance Requirements for Insuring Trusts In today's world of busy probate courts and exorbitant death taxes, the living trust has become a common manner of holding title to real ...
Read More
Young couple creating a plan of action

Build a Plan of Action and Get Ready

Build a Plan of Action and Get Ready Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will ...
Read More
Setting a price

Setting the Price

Setting the Price The price is the first thing buyers notice about your property. If you set your price too high, then the chance of alienating buyers is higher. You ...
Read More
Signing a contract

The No-Cost Thirty Year Fixed Rate Mortgage

The No-Cost Thirty Year Fixed Rate Mortgage There really is no such thing as a no-cost mortgage loan. There are always costs, such as appraisal fees, escrow fees, title insurance ...
Read More
Action Plan

Plan of Action

Plan of Action Analyze why you are selling - If you understand your motives, you will be able to better negotiate and to get what it is that you want, whether ...
Read More
Credit report

WHAT’S A FICO®?

WHAT'S A FICO®?   When you apply for a mortgage loan, you expect your lender to pull a credit report and look at whether you've made your payments on time. ...
Read More
Paperwork

Statements of Information

Statements of Information What's in a name? When a title company seeks to uncover matters affecting title to real property, the answer is, "Quite a bit." Statements of Information provide ...
Read More
Signing a contract

Advantages of Different Types of Mortgage Lenders

Advantages of Different Types of Mortgage Lenders What kind of lender is best? If you ask a loan officer, "What kind of lender is best?" the answer will be whatever ...
Read More
title insurance - keys to a house

Understanding Title Insurance

Understanding Title Insurance What is title insurance? Newspapers refer to it in the weekly real estate sections and you hear about it in conversations with real estate brokers. If you've ...
Read More
Mechanic's Liens

Mechanic’s Liens

Mechanic's Liens 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 ...
Read More
Condo in the sky

Condominium and PUD Ownership

Condominium and PUD Ownership Builders, in an effort to combat the dual problem of an increasing population and a declining availability of prime land, are increasingly turning to common interest ...
Read More
Insurance document

Why Do You Need Title Insurance?

Why Do You Need Title Insurance? It's a term we hear and see frequently - we see reference to it in the Sunday real estate section, in advertisements and in ...
Read More
Calculating assets

Required Reporting to the I.R.S.

Required Reporting to the I.R.S. Sellers of real property will have certain information regarding the sale reported to the Internal Revenue Service. This required reporting is a consequence of the ...
Read More
Environmental testing

Environmental Issues

Environmental Issues When purchasing a piece of property, it is important to be aware of any environmental liabilities associated with it. For example, you should find out if there are ...
Read More
Buyer Agent

Use a Buyer’s Agent

Use a Buyer's Agent It's important that you choose an experienced agent who is there for you. Your agent should be actively finding you potential homes, keeping you informed of ...
Read More
Understanding Preliminary Reports

Understanding Preliminary Reports

Understanding Preliminary Reports After months of searching, you've finally found it -- your perfect dream home. But is it perfect? Will you be purchasing more than just a beautiful home? ...
Read More
Estate Planning Graphic

Living Trusts

Living Trusts Estate planners often recommend Living Trusts as a viable option when contemplating the manner in which to hold title to real property. When a property is held in ...
Read More
Adjustable Rate Mortgages - The Basics

Adjustable Rate Mortgages – The Basics

Adjustable Rate Mortgages - The Basics An adjustable rate mortgage (ARM) has an interest rate that fluctuates periodically. This is in contrast to a fixed rate mortgage, which always has ...
Read More
Insurance document

Title Insurance When Refinancing Your Loan

Title Insurance When Refinancing Your Loan Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the ...
Read More
Considering Offers

Considering Offers

Considering Offers When reading an offer, keep in mind that you are out to get the best price AND the best terms for you. If you focus solely on the ...
Read More
Sell my home

Know Why You are Selling

Know Why You are Selling If you know exactly why you are selling then it is easier for you to follow the right plan of action for getting what you ...
Read More
Financial Documents

Documenting Your Assets – Verifying Your Down Payment

Documenting Your Assets - Verifying Your Down Payment When buying a home, it is not enough to just come up with the money. With the exception of no asset verification ...
Read More
escrow

The Functions of an Escrow

The Functions of an Escrow Buying or selling a home (or other piece of real property) usually involves the transfer of large sums of money. It is imperative that the ...
Read More
Counting Money

Title Insurance – Where Does Your Dollar Go?

Title Insurance - Where Does Your Dollar Go? Title Insurance: As a homebuyer, the term is probably familiar - but is it understood? What is your dollar actually paying for ...
Read More
Payment Calculations

The Biweekly Mortgage – Who Needs It?

The Biweekly Mortgage - Who Needs It? Have you received an advertisement offering to save you thousands of dollars on your thirty-year mortgage and cut years off your payments? With ...
Read More
Shaking hands on a land contract

Land Contract

Land Contract An alternative to a non-conforming loan is the use of a land contract, which is allowed in some states. A land contract is an agreement between a buyer ...
Read More
House for sale by owner

For Sale By Owner – A Good Idea?

For Sale By Owner - A Good Idea? FSBO (pronounced fizz-bo), or For Sale By Owner, is a way of selling your home without the use of a professional real ...
Read More
Woman shaking hand

Making a Good First Impression

Making a Good First Impression If you want buyers to be interested in your home, you need to show it in its best light. A good first impression can influence ...
Read More
Short Sale

What is a Short Sale Anyway?

What is a Short Sale Anyway? An increase in foreclosure rates will inevitably bring with it an increase in short sales. But what is a short sale? A short sale ...
Read More
Diagram of housing market on computer screen

Hot, Normal, and Cold Markets

Hot, Normal, and Cold Markets Hot Market This is an extremely competitive market and is advantageous to the seller. Sometimes, homes will sell as soon as they are listed or ...
Read More
Lender handing someone a pen to sign a contract

Types of Mortgage Lenders

Types of Mortgage Lenders Mortgage Bankers Mortgage Bankers are lenders that are large enough to originate loans and create pools of loans, which are then sold directly to Fannie Mae, ...
Read More
foreclosure

Thinking About Buying a Foreclosure?

Understanding Foreclosures It is an unfortunate commentary, but when economic activity declines and housing activity decreases, more real property enters the foreclosure process. High interest rates and creative financing arrangements ...
Read More
Picture of items needed for a loan

Items You Need When Applying For a Loan

Items You Need When Applying For a Loan Have These Items Ready When You Apply For a Loan It used to be that lenders mailed out verifications to employers, banks, ...
Read More
Rusty Metal

Underground Heating Oil Tanks

Underground Heating Oil Tanks Underground heating oil tanks can pose many potential problems to both home buyers and sellers. They have been the source of many environmental problems such as ...
Read More
dreaming of a home

Is Buying a Home Still a Smart Plan

Is Buying a Home Still a Smart Plan With the burst of the housing bubble, credit crisis, and millions of foreclosures across the country, you may wonder if buying a ...
Read More
Cash fanned out

Closing and Title Costs

Closing and Title Costs It's the big day. The day you go to the title or escrow company, sign your name on the dotted line, hand over a check and ...
Read More
Hazardous lead paint removal

Lead Poisoning

Lead poisoning Lead poisoning is a serious problem that can lead to adverse health problems. In children, high levels of lead can cause damage to the brain and nervous system, ...
Read More
time-and-money

Getting the Highest Price in the Shortest Time

Getting the Highest Price in the Shortest Time In order to get the highest price in the shortest time, you need to know how to market your home. The better ...
Read More