Mechanics Lien Against a Residential Property Explained

Oct 28, 2010
Kelly Smith

A concrete form for a new driveway - Kelly Smith

Having a mechanics lien filed against your property and home is an emotional and financial nightmare. Know the facts to protect yourself and home equity.

A lien is a legal process to financially protect anyone involved with building, remodeling, or working on a home. It ensures that they will be paid for work performed and building materials supplied. Who can file against you as the homeowner? Not just the general contractor and the carpenters, plumbers, electricians, etc. that he hires. It extends to land surveyors, architects, and engineers.

If your property is filed against and the case goes to litigation and it goes badly for you, the local sheriff can sell your home and use the proceeds to pay off your bills.

How is a Mechanics Lien Filed?

Workers have a right to be paid, in a reasonable amount of time, for work successfully completed. It's not enough to pay the general contractor; you will still be liable if he fails to pay material suppliers or subcontractors.

What is a reasonable amount of time? It varies, but William Trimble says, “Normally, those owed money after 120 days past final invoicing start looking at the time span as beyond reasonable.” At that point a lien may be filed and a copy will be served on the property owner.

The Building Contractor's Legal Responsibilities

How is the time frame established? The filer should go to the county and file a formal Notice of Completion as soon as the job is done and the inspectors, if any, have signed off on the building permits assuring that the local building code was followed.

If the amount of construction funds in dispute is above $500, the contractor must serve a Twenty Day Preliminary Notice. Failure to complete this step can result in losing the right to file a lien at all. The property-owner's responsibility is to notify the filer if there is any incorrect information on the Notice.

Legal Protection for the Property Owner

If you are the property owner, know that it pays to be proactive. Following these steps is as important as the ones followed when you select a contractor. Normally, payment for construction work isn't paid in a lump sum. Payment is made in “draws” in stages as the work is completed. At each draw, be sure to have the contractor sign a Conditional Lien Waiver. This will protect you for the amount of money paid thus far in the event of a lien. Think of it as a payment receipt.

When the last draw is made following completion of the remodel or construction project, be sure to have the contractor sign an Unconditional Lien Waiver. But what if the general contractor hasn't paid the subs, or the lumber yard, or suppliers? Legally, you are still liable for a mechanics lien so be sure not to release the final check until everyone in the supply chain has been paid by the general contractor.

Yes, this all seems very tedious and detail-oriented, but when you consider that your home remodeling investment is at stake, it's well-worth the effort. Finally, always check your local or state laws to see whether your legal stipulations vary from the basic information outlined in this article.