A lien is an interest, encumbrance, or debt owed by a property owner which is attached to their property in order to guarantee the payment of that debt or encumbrance. In some cases, when a debtor defaults on agreed upon lien payments, a lien holder may force a foreclosure sale of the property in order to satisfy the lien. A contractor’s or mechanic’s lien is a legal means by which those who work on real property, such as sub-contractors, suppliers, auto mechanics, and others, may make claim for payment for the work done. Upon full payment, the lien holder provides a release of the lien. Because sub-contractors often have less recourse to file lawsuits for payment than other service or personal property providers, a lien is the most appropriate means for them to ensure payment.
Types of Construction Liens
There are a wide variety of construction liens that can be placed on property for services or property contracted for, and they are not only limited to fields related to construction. The specific guidelines for contractor’s liens vary by state, but these general categories are representative.
- Construction liens
- Mechanics liens
- Contractors liens
- Attorney’s liens
- Architect’s liens
- Procurement liens
Rights of Property Owners
There are specific laws in each state that govern how a construction or mechanic’s lien is filed and pursued. However, in most states such a lien must be “perfected,” or filed and pursued in accordance with the state statutes, ending in foreclosure. There are rules governing these liens to protect the property owners against whom they are created:
- The property owner must be given notice of the entitlement to the lien in some states.
- Workers in some states are required to file notices when the required work is beginning so the property owner can begin preparing for payment.
- If payment is not forthcoming, some states require the lien holder to file notice of the lien in the appropriate records office.
- The specified time period for filing notice of the lien varies by state, but all states require notification in some form. It can be when the work begins, within a specified period after it is completed, or within a specified period after the entire project is completed.
- If foreclosure is the only option, every state requires that notification be filed within a specified period of time.
Rights of Lien Holder
Lien holders have a right to payment for the products or services they provide. If there are multiple workers and suppliers on a project, those providers have a right to payment without being required to reclaim their work or supplies once they have been installed. They have a right to foreclose on the property securing the lien if payment is not forthcoming.
The laws governing mechanic’s liens differ by state, but they are always complex methods of obtaining payment for work, services, or supplies. If you are due payment and have the need to file a construction or mechanic’s lien to secure payment, a real estate attorney who specializes in property laws for private or commercial property has the expertise to help.