What is a Mechanics Lien

A mechanics lien is actually a hold order on a property typically filed a contractor, a laborer, a material supplier or a subcontractor, which is promptly recorded at the local county’s recorder office. Continuing to remain unpaid, a foreclosure action on the property maybe filed to force the sale of the property in lieu of compensation for unpaid debts.

A lien can typical result when the prime or general contractor sometimes referred to as the direct contractor in mechanics lien revision statutes (effective July 1, 2012), was not able to pay suppliers, laborers and subcontractors. From a legal point of view, the homeowner is ultimately responsible for payment of debts, even if full payment has been made to the general contractor.

There are several court cases filed by subcontractors against general contractors for non-payment of services rendered whereby it also stipulates homeowners and business establishments to be equally liable for such compensation. This also includes claim cases from suppliers and laborers who have not received valuable considerations for their supplies and services rendered. The common reasons why General Contractors or Direct Contractors are unable to pay such services and supplies are lack of collection or non-collection of the valuable consideration as stipulated in their contracts. Due to this reasons, revision statutes amended old laws.

However, a homeowner has also their own protection rights against direct contractors for non-payment of third parties, subcontractors, laborers and suppliers that worked for them. Please refer to the other articles in this site too.

A mechanic’s lien can result in problems including:

• First and foremost, when the homeowner does not pay the lien, a foreclosure order will be enforced on the property. This property will be sold to pay for the unpaid compensation or in favor of the complainants. Such cases are now easily and quickly expedited with the new revised lien statues.

• To settle immediately an impending lien case, homeowners experience double payment for a job done. These are on situations when the homeowner has already paid the direct contractor. However, the direct contractor did not pay the supplier, the subcontractor, or the laborer involved the project.

• Once a lien is recorded on the property title, this can affect the owner’s ability to sell the property, borrow against it, or refinance it. Most financial institutions that deal on refinancing property check with the county recorder’s office for liens and encumbrances. Property buyers also check with the same institution to verify the status of the property they are buying. Banks that extend property loans with collateral value also check on county recorder’s office for verification purposes.

Homeowners may however be relieved of such problems if proper planning and research on how to enter into a business contract, completing an in depth background check on the general contractor, including its suppliers, subcontractors and list of laborers. It may sound tedious and tiresome at the beginning but will prove to be beneficial at the end. Always bear in mind about the conditions of a mechanics lien.