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The economy has slowly been moving in a direction that has allowed the construction industry to pick back up. Modern homes are being constructed, and improvements on existing homes are being contracted. Mechanic’s liens are a vital tool within this process. Though most people don’t even know what these liens are, they play a crucial role in most construction type projects. Due to this, it is necessary for homeowners and contractors to understand how these liens work.
What is a Mechanic’s Lien
Mechanic’s liens are liens placed on property by contractors, suppliers, and subcontractors. These liens in effect ensure that workers, engineers and other vital characters in the construction process will be able to get their payment after all of their work is done on a property. A lien allows the claimant, also known as the lienor, to collect their owed money and sometimes even force the sale of a home to do so. It’s important to remember, however, that these liens are beneficial for everyone.
It’s quite obvious why mechanic’s liens are beneficial for contractors and subcontractors. Contractors can ensure that they’re paid by the homeowner, and subcontractors can ensure that they’re paid even if the homeowner or general contractor fails to pay them. Homeowners, however, also benefit. These liens allow construction projects to go forward without an otherwise full upfront payment. This can be very beneficial for anyone having construction performed.
Overturning Mechanic’s Liens
The best way to fight a mechanic’s lien is to ensure one is never placed on a property. This can be done by obtaining releases of lien from contractors, suppliers and subcontractors before making any payment on work that will be performed. If partial payments must be made, then partial releases should be obtained.
Before making a final payment, an individual should get an affidavit from the contractor that specifies every party that provided services or labor. The contractor should also show evidence that releases from these other parties have been obtained. Unfortunately, if these steps aren’t followed correctly, liens may exist on a property.
It is possible for a person to overturn a lien by filing bankruptcy. This is obviously a serious matter which should definitely be discussed with a qualified attorney. It is also possible to work something out with the lien holder for them to remove or waive the lien. Another obvious method of handling this is by paying off the owed debt, but there are times when liens are taken out completely dishonestly. This makes it absolutely vital to have an attorney in any of these scenarios.
Protecting Mechanic’s Liens
Contractors and subcontractors also have protections against those who try to file bankruptcy to avoid paying their legitimate debts. If a homeowner is simply trying to get work done for free, the courts can sometimes help. When bankruptcy is filed, automatic stays are put onto any foreclosure process that arises or is already in process. This means that claimants cannot collect their owed money in a court of law.
It is possible, however, for a contractor or subcontractor to file for relief from this automatic stay. This will allow them to foreclose on their lien, but this process must be done through the bankruptcy court. The claimant must show that just cause exists for this relief to be given, and this is sometimes a difficult process. Once again, an individual with a lawyer at their side has a much better chance of coming out of the mess successful. Obtaining the services of an accomplished attorney is likely the only way a contractor will be paid after a debtor files bankruptcy.
Mechanic’s liens have been in use in America since its founding, and they are a vital resource in stimulating construction projects. Laws related to mechanic’s liens, however, are fluid in a way. The need may arise for a homeowner or contractor to take steps to overturn or protect a lien, respectively. This may at times require legal help, but it’s a small price to pay to ensure a construction project is handled effectively.
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