Mechanic’s liens: Overview, definition, and example
What is a mechanic’s lien?
A mechanic’s lien is a legal claim filed by a contractor, subcontractor, supplier, or construction professional against a property they have worked on or supplied materials for but have not been fully paid. This lien ensures that those who contribute labor or materials to improve real property can secure payment by placing a claim on the property itself.
For example, if a contractor renovates a home and is not paid for their work, they can file a mechanic’s lien against the property to recover the unpaid amount.
Why is a mechanic’s lien important?
A mechanic’s lien is important because it protects contractors, subcontractors, and suppliers from nonpayment for their services or materials. It provides them with a legal mechanism to recover unpaid amounts by creating a claim against the property they improved.
For property owners, understanding mechanic’s liens is crucial because a lien can delay property sales, refinancing, or other transactions until the debt is resolved. Properly managing payments and ensuring lien waivers are in place can help avoid disputes and the filing of liens.
Understanding mechanic’s liens through an example
Imagine a general contractor hires a plumbing company to install new plumbing in a commercial building. The plumbing company completes the work but does not receive payment from the contractor. The plumbing company files a mechanic’s lien against the property, creating a legal claim for the unpaid amount. To resolve the lien, the property owner may need to pay the plumbing company directly or work with the contractor to settle the debt.
In another example, a homeowner hires a landscaping company to redesign their backyard. After completing the project, the landscaping company does not receive full payment as agreed. They file a mechanic’s lien, preventing the homeowner from selling the property until the outstanding balance is paid.
An example of a mechanic’s lien clause
Here’s how a mechanic’s lien clause might appear in a contract:
“The Contractor shall promptly pay all subcontractors, suppliers, and laborers employed in connection with the Project. The Owner may withhold payment to the Contractor if any mechanic’s lien or claim is filed against the Property. The Contractor agrees to indemnify and hold the Owner harmless from any such claims and to promptly resolve all liens.”
Conclusion
A mechanic’s lien is a powerful tool for construction professionals and suppliers to secure payment for their work or materials. For property owners, understanding the implications of a lien is essential to avoid delays or complications in property transactions. Including clear payment terms and lien waiver requirements in contracts helps protect all parties, ensuring smooth project execution and timely payments.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.