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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 materialman 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, materialmen 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.
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