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Project Planning Guide

Mechanic's Liens

A mechanic's lien has nothing to do with repairing your car. A mechanic, by law, is a tradesman, artist, or anyone who works with tools, including carpenters, electricians, plumbers, roofers, and a host of others. A lien is a legal claim to real property until a debt is paid.

If you employ a tradesperson or contractor to work on your home and then, following a dispute, refuse to pay, the worker has the right to file a lien. The lien is a claim on your real property such as your house. Rather than just demanding payment from the homeowner, which might be ignored, the lien makes the property responsible for payment.

Why a Lien?

In some cases, you may receive a lien even though you have paid the general contractor in full. In this case, it is probable that the general contractor did not pay a subcontractor, such as a concrete company or roofer. Perhaps the general contractor was late making payments or, in a worst-case scenario, has gone bankrupt. Regardless, the tradesperson has a legal right to be paid and has filed claim on your property for the amount owed.

Having to pay twice for the work seems unfair. The lien law, however, is based on long-held presumptions that the homeowner, whose property value has been enhanced by the work performed, bears ultimate responsibility for all debts incurred.

If you have to pay twice—once to the general contractor and again to settle the lien—you then have the right to seek legal redress against that contractor. In most cases, however, liens are avoided by dealing with reputable contractors with good standing in the community.

Preliminary Notice

Before filing a lien on your property, the claimant, or person who has not been paid, must file a preliminary notice, also called a 20-day notice. This notice must be sent to the homeowner no more than 20 days after the claimant begins working on a property. If the subcontractor fails to do this, however, he or she can still file a late notice and go ahead with the lien.

It is important to realize, however, that receiving a preliminary notice normally does NOT mean someone is going to file a lien against you. Responsible contractors often use the preliminary notice as a legitimate means of protecting themselves and their subcontractors. If a lien must eventually be filed, the notice is already in place.

Some general contractors have every subcontractor file a preliminary notice as soon as he or she comes on the job, and every 20 days thereafter, to keep a clear record of who is on the job. You, as the homeowner, can also use these notices to your advantage. Before making the final payment to the general contractor, call all subs who have submitted 20-day notices and confirm that they have been paid in full. Write down each sub's name, the date you called, and their payment confirmation or lack thereof. Keep these notes in your records.

Avoiding Mechanic's Liens

To avoid a lien after the project is finished, ask the general contractor to provide you with either a conditional waiver and release or an unconditional waiver and release. In the first case, the contractor gives you a conditional release in exchange for payment in full by personal check. The release is conditional until the check is cashed, when it automatically becomes an unconditional release. In exchange for an unconditional waiver, you give the contractor a certified check for the work completed.

Next, Change Orders and Punch Lists.
Or, go back to the Project Planning Guide.