If you are a homeowner doing a renovation or construction project, you want to try to avoid mechanics liens. A mechanics lien is a legal tool that can be employed by contractors, subcontractors, and suppliers who perform work or provide materials on your home, and claim that they were never fully paid. An electrician, a tile supplier, and an asbestos abatement firm are all examples of the types of entities that might file a lien. Generally, the public policy behind liens is to ensure that these types of workers receive payment for their work if they improve or repair property. Liens create an additional cause of action against owners.
Consider this example: You hire a contractor to renovate your bathroom for $10,000. Perhaps because you feel his work was shoddy, or perhaps because you feel he is overcharging you, you pay him only $7,000. The contractor may turn around and file a lien for $3,000, the amount outstanding. He can then attempt to “foreclose” or “sue on” the lien, in addition to suing you for breach of contract.
Consider another example: You hire a contractor to renovate your bathroom for $10,000. He hires a plumbing specialist (commonly known as a “subcontractor”) for $2,000. The contractor takes your money, but never pays the plumber. The plumber can now sue the contractor for breach of contract, and can also place a lien on your property. The lien indicates that the plumber provided labor or materials that improved your property by $2,000, but he was never paid.
As a homeowner, liens can be frustrating. Typically, the lien is docketed in the county clerk’s office and serves as a “cloud on title.” This means that the document is public for all the world to see. In other words, it makes it difficult to sell, transfer, or refinance your home, since anyone doing a title search on your land would find that lien. A potential buyer, for example, would not want to take title to property that has liens on its record, since that buyer would then become responsible for paying off those liens in the course of the purchase.
Each state has its own laws on liens. (There is no "federal" lien law for contractors.) Lien laws often use archaic legal vocabulary, and vary greatly from one state to the next. For this reason, it is important to consult a lawyer with real estate experience in your state. Ordinarily, though, the goal of lien laws is to establish the specific process by which liens can be filed and removed.
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