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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 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 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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