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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
where full payment for the work of improvement has been made by the
homeowner.
The mechanics' lien is a right that a state gives to workers and suppliers
to record a lien to 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 mechanics' liens may be
recorded by persons who have provided labor, services, or materials to a
job site, 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's 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. |
