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 when the homeowner has made full payment
for the work of improvement.
The mechanics’ lien is a
right that a state gives to workers and suppliers to record a lien and 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 persons who have provided labor, services, or materials to a job site may
record mechanics’ liens, 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’ 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.