{"id":833,"date":"2020-03-02T09:35:24","date_gmt":"2020-03-02T14:35:24","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=833"},"modified":"2024-04-25T23:20:32","modified_gmt":"2024-04-26T03:20:32","slug":"lien-in-a-primer-on-mechanics-liens","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/lien-in-a-primer-on-mechanics-liens\/","title":{"rendered":"Lien In: A Primer on Mechanic’s Liens"},"content":{"rendered":"\n
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In every\nstate, contractors who do work on a home can place a mechanic’s lien<\/em> (construction\nlien) on the title if they do not get paid. A mechanic\u2019s lien is a claim\nfiled for work done, materials supplied, or both. By operation of\nstate law, this claim becomes a lien against the property’s title.<\/p>\n\n\n\n

This is the\ncontractor’s leverage to get paid. Depending on state law and the contract\nprovisions between the general contractor and the client,\nsubcontractors can also file liens. To protect these\ncompanies’ leverage, some states do not allow contractors to give\nup this right in exchange for payments, but there are plenty of exceptions in\nthe state laws, so it’s a common practice for clients to avoid potential\nliens through lien\nwaivers<\/a><\/em>. <\/p>\n\n\n\n

But\nsometimes, mechanic’s liens do take hold. Because these\nliens attach to the property, not to the individual who ordered\nthe work, an unpaid lien will haunt the next person in line to own the home. If\nyou’d prefer not to live in a haunted house, here’s what you need to know.<\/p>\n\n\n\n\n\n\n\n

Minor\nDebts Can Have Major Impacts on Title<\/h2>\n\n\n\n

These liens\naren’t only for major construction work or renovations. They can represent\nsmall debts involving weatherproofing, driveway maintenance, and so\nforth. Yet they can have a big impact later on, when a buyer wants to\nsell the home or borrow on the home equity.<\/p>\n\n\n\n

And yes, it\nis possible for a buyer to be caught unaware by liens filed before\nthey took title to the home. The builder or previous owner likely would have\nknown about the lien, but this is not always disclosed to the buyer.\nWait… Doesn’t the title search bring up clouds on the\ntitle? Usually, but perhaps the title search took place before the lien\nwas recorded and the county’s website was updated. Or the former owner’s\npayment got lost in the mail. Maybe a contractor failed to pay a\nsubcontractor. Problematic scenarios are many.<\/p>\n\n\n\n

To find out\nwhether any liens have attached that escaped your\nattention, check with the Register of Deeds or its website. The\noffice to check is in the county where your home is. As a homeowner, you’ll\nwant to remove any liens from your home title. Mechanic’s liens typically\nexpire within a year or, in some states, two years. But even if a lien has\nexpired and is unenforceable, it can still create hassles when, for instance,\nyou want a home improvement loan or you’re ready to sell your home.\nAn enforceable lien can lead, in extreme cases, to foreclosure.<\/p>\n\n\n\n

How\na Contractor Files a Mechanic’s Lien <\/h2>\n\n\n\n

Contractors\nwishing to file a lien should first check the county rules and deadlines. There\nare typically several steps in the process.<\/p>\n\n\n\n

Step\n1.<\/h3>\n\n\n\n

The\ncontractor gives preliminary\nnotice<\/em> to the client and any relevant lenders\nand contractors. Some states let contractors send a preliminary\nnotice for unpaid bills before all work is completed.<\/p>\n\n\n\n

Step\n2.<\/h3>\n\n\n\n

After\nthe preliminary notice, following the applicable timeline, the contractor\nsends a notice of lien.<\/em><\/p>\n\n\n\n

Step\n3.<\/h3>\n\n\n\n

The\ncontractor gives public notice of the lien by recording it in the\ncounty. <\/p>\n\n\n\n

Step\n4. <\/h3>\n\n\n\n

To avoid\nexpiration of the lien, the contractor must enforce it in court within\na state-imposed deadline (perhaps a six-month window) from the date when\nwork or materials were last provided to the building site.<\/p>\n\n\n\n

Step\n5.<\/h3>\n\n\n\n

After the\ndebt is satisfied, record a release of the mechanic’s lien with the\ncounty. Spare the property owner the need to demand release or file a\nquiet title action and bring a judge into the matter to invalidate the lien.\nThis is more than just a courtesy. Contractors have the legal responsibility to\ntake the lien off the home once it’s paid off.  <\/p>\n\n\n\n

How\na Homeowner Can Remove a Mechanic’s Lien <\/h2>\n\n\n\n

There are\nseveral actions the homeowner can take:<\/p>\n\n\n\n

Step\n1.<\/h3>\n\n\n\n

Call the\ncontractor and ask to have the lien removed. You might need to work out a\nsettlement, which is typically easier and cheaper for both sides\nthan litigation. <\/p>\n\n\n\n

Step\n2.<\/h3>\n\n\n\n

If the lien\nis substantial, and you’re pressed for time because you’re trying to sell\nor take a loan out, you might be able to bond off the lien. If a\nsurety company issues a bond with the court, the lien itself will be\ndischarged, but you’ll still ultimately have to repay the contractor. <\/p>\n\n\n\n

Step\n3.<\/h3>\n\n\n\n

As a last\nresort, you might need to obtain a court order to discharge the lien.\nLawsuits are expensive and time-consuming, and can be appealed if the\nlosing side is unwilling to back down.<\/p>\n\n\n\n

Pro\ntip: <\/em><\/strong>If\na contractor files a lien without basis, state law might offer remedies,\nsuch as New Jersey’s law<\/a> to curb frivolous lien filings. <\/p>\n\n\n\n

Liens\nand Homeowner’s Insurance <\/h2>\n\n\n\n

What if you\ntook the time and spent the money to get a homeowner’s title insurance\npolicy? Are you protected against unexpected lien issues?<\/p>\n\n\n\n

First, note\nthat even unrecorded mechanic\u2019s liens can cloud titles, and your title\ninsurance might not cover unrecorded liens. If you are buying title insurance,\nyou can request that this typical exemption be removed so that your policy is\neffective against unrecorded as well as recorded liens.<\/p>\n\n\n\n

Whether the\npolicy covers the lien also depends on timing:<\/p>\n\n\n\n