When and How to File a Mechanic’s Lien

202002.05

The lien is a common tool that contractors have against the menace of clients not paying their bills. It is sometimes the only tool that contractors without a large amount of capital have in order to secure payment for services rendered. This important tool must be used wisely, however. It is essential to deploy liens at the right times and in the right situations in order to ensure that a contractor will receive what they are owed.

What is a mechanic’s lien?

A mechanic’s lien is a lien placed on a piece of property by a person or company that has been contracted to perform work and has not received payment. It works outside of the traditional judicial and bail bonds process. This lien is helpful because it allows for an individual to avoid going through the courts and filing a lawsuit. A lien attaches to a title and makes moving a piece of property incredibly difficult. The lien creates a responsibility to pay contractors a certain amount of money that is present at the time of a sale or any other change in title. It is a document that is often required for anyone who is considering filing a lawsuit against a company that is failing to make payments they owe.

Process of filing a mechanic’s lien

The process of filing a mechanic’s lien is relatively clear and direct. A mechanic’s lien must be filed before the title to a piece of property is transferred to a new owner. The lien is only effective because it ties up the eventual sale process. It can only apply before the person responsible for non-payment sells the property. Liens can often be obtained at the county courthouse. There is a process that an individual has to go through. This process presents an ability for a company to fight such a decision for a lien and file a release of lien. Once the lien is registered at the county courthouse, a presiding judge has to remove it either through an order or through full payment.

What to do

The first step that any construction subcontractor should take when considering a lien is to talk to the contractor or property owner and attempt to gain back what they are owed. In many instances, the payment might be slow but forthcoming. Judges and real estate professionals suggest that an individual push as hard as he or she can in order to reach a settlement that is suitable to both parties. Such a settlement will only be possible if a person pays off the debts that they owe in most instances. If these efforts fail, a person then has the opportunity to enact a lien. The lien will make it difficult for an individual or company to sell their land. Once they receive preliminary notices, there is a considerable chance that the company will come to the table and will seek a beneficial settlement in order to file a release of lien. Such a settlement should be pushed by both parties. Only in extreme cases will one or more parties still go to trial. It is often more beneficial to simply pay off the lien or settle out of court for an amenable amount of money.

Conclusion

A lien can be the most powerful tool that a contractor has for securing payment. In many instances, simply the fear of such a lien or preliminary notices can cause a client to act fairly and make due payment. But these tools are basically ineffective if a person does not use them within a legally proscribed period of time. Construction companies should reach out to lawyers and other professionals before they make a definitive move on a lien. Such advice can mean the difference between payment and a lack of payment for many companies.