Whether you’re a property owner or a contractor, understanding the ins and outs of mechanic's liens can be tricky business.
Removing a mechanic's lien will be the primary goal for homeowners, whereas contractors will be focused on securing payment for work completed.
No matter which side of the mechanic's lien you’re on, understanding your rights and next steps is important.
In this guide, we’ll cover everything you need to know about removing a mechanic's lien through proper and legal channels — and what you can do to avoid a mechanic's lien in the first place.
Flexbase: Streamlining the Invoicing Process is One Way to Avoid Filing a Mechanic's Lien on a Property
Filing a mechanic's lien on a property should be the last resort for contractors. Unfortunately, contractors are often subjected to late payments, incorrect payment amounts, or payments being completely withheld by clients.
But, with Flexbase, contractors are getting paid sooner with our automated payment app.
The Flexbase invoicing app streamlines the entire invoicing process, including the following tasks:
- Progress payments
- Lien waivers
- Invoice reminders
- Preliminary notice
- Intent to file a lien; and
- mechanic's liens
With Flexbase’s payment reminder process and automatic legal notices, you’ll not only get paid sooner, but you’ll also save yourself the hassle of filing mechanic's liens — all for free.
Flexbase doesn’t get paid until you do.
How Do Mechanic's Liens Work?
A mechanic's lien acts as a legal claim against any type of property. They are used by subcontractors and suppliers who haven’t received payment for construction work completed on a property.
Contractors use mechanic's liens as a way to force payment for the work they’ve done to a home or property.
You could be subject to a mechanic's lien even if it wasn’t you who missed the payment. Let’s say you’ve done a kitchen remodel and the general contractor failed to pay the cabinet supplier; the supplier can then place the lien against your home to recover that money.
As a homeowner, you are responsible for any payments not made to suppliers, laborers, or subcontractors by your general contractor, even if you’ve already paid the GC for supplies and labor.
Understanding how a mechanic's lien works is important, not only to avoid having one filed on your property, but also how to go about removing a mechanic's lien should one be filed against your property.
What Happens After a Mechanic's Lien is Filed?
Once a mechanic's lien is filed, the contractor must “enforce” or “foreclose,” which means bringing a lawsuit against the parties contracted with. Typically, the lien stays on file while action is pending and if successful the contractor has the security of the property to ensure payment is made.
In most cases, there is a limited amount of time for a mechanic's lien to be enforced, or the lien will expire completely.
State laws determine how long a contractor or supplier has to enforce a lien, so it’s important to know the local laws before filing a mechanic's lien.
For Property Owners: 4 Steps on How to Fight a Mechanic's Lien on Your Property
The last thing any homeowner imagines when starting a new build or renovation is that it will end in a dispute with the contractor, resulting in a mechanic's lien on their property.
A mechanic's lien can make it difficult to sell or refinance your home, and can even end in a lawsuit or a forced sale.
Removing a mechanic's lien is of utmost importance to homeowners. There are a few ways homeowners can accomplish this.
Step #1: Determine if the Lien is Valid
Depending on which state a lien is filed in, there will be specific requirements the contractor must meet in order for the lien to be considered valid and enforceable.
These requirements may include:
- A minimum debt amount
- Notice requirements (like filing a preliminary notice and intent to file lien)
- Timing requirements
In many states, you’re able to file “preliminary objections” to any lien that appears invalid. The court will make a determination or ask for evidence if there is any question regarding the lien’s validity.
Step #2: Identify the Claimant
In the case of a valid lien, the easiest and recommended course of action is to identify the claimant and negotiate a settlement.
Many times, contractors would prefer to negotiate payment terms and amounts rather than get caught up in a mechanic's lien's legalities.
You may be able to make payments until the balance is paid or negotiate a lesser amount in exchange for quick payment.
If there is an issue with the quality of work or the scope of work is in question, you may end up paying money that you don’t feel the contractor is entitled to, but ultimately removing a mechanic's lien from your property takes priority in this situation.
Any contractor, laborer, or supplier involved in the construction project on a given property has the right to file a mechanic's lien for payment not received on services rendered. A mechanic's lien could eventually force the sale of the property in place of compensation.
Step #3: File a Lien Bond to have the Lien Removed by Your County
As the homeowner, you can obtain a bond, called a surety bond or a lien discharge bond, from an insurance company to cover the lien’s amount.
Because lien bonds can be complex, you should meet with an agent from the insurance company to determine which type of bond would suit your situation. Once secured, removing a mechanic's lien, or “bonding off” the lien can be done through the county clerk.
The contractor is ultimately responsible for removing a mechanic's lien once it’s been filed. This consists of one-to-two-page notarized documents that will need to be filed with the same county clerk that received the lien originally.
The cost of removing a mechanic's lien depends on the actions taken by the homeowner and contractor. If litigation is avoided, the cost is equal to the amount owed or agreed upon. Lawyer fees can add up quickly, making the cost of removing a mechanic's lien far more expensive.
Step #4: Filing a Lawsuit Against the Contractor
Litigation should be considered as a last resort when fighting to have a lien removed from your property, but it could come down to filing a lawsuit. If it comes down to filing a lawsuit, you’ll need to know the steps to take.
First, you’ll need to retain a lawyer who practices construction or real estate law who will file an action to “discharge” or “vacate” the lien.
Filing a lawsuit does two things. It:
- Forces the claimant to establish a case explaining why you own money, and
- Gives you the opportunity to argue that you don’t owe the money, or that the contractor’s work was subpar or incomplete.
If the lawsuit is successful, then the court will order to remove the lien from the property record. Although it’s rare, additional damages may be awarded as well, but usually not even enough to recover the lawyers’ fees.
The process is time-consuming, expensive, and unpredictable, taking months, even years, for a judgment. In addition, contractors have the right to appeal any decision that does not go in their favor.
Do Mechanic's Liens Expire?
Regardless of which state the original lien was filed, it’s important to understand that no mechanic's lien stays valid forever. Any lien, once filed, is on a very specific and set timetable, and will expire according to state law.
If you’ve filed a mechanic's lien that has already expired, then there’s not much you can do to resurrect the claim. Once expired, the lien is no longer valid or enforceable.
Expired liens are not automatically removed from a property. Removing a mechanic's lien can happen in one of two ways:
- Through a petition to the court to release the lien; or
- The claimant (contractor) records a release of mechanic's lien
Once payment has been received, or the lien has expired, the right thing for contractors to do is release the lien on the property.
Unfortunately, if a lien is not released by the contractor, it will appear on any future title searches, even if it’s been paid out or expired. It’s in the property owner’s best interest to have the mechanic's lien off the books. For this reason, the owner may file a lawsuit against the claimant to have the lien formally released.
This is not a battle you want to fight. Not only will you end up paying expensive attorney fees, but you could be hit with statutory penalties, all of which can be avoided by simply releasing the lien.
If you find yourself faced with a customer that won’t pay, sending a mechanic's lien may seem like your only course of action.
But, with the Flexbase payment reminder system, our contractors are getting paid sooner and avoiding the hassle of filing for and following up with a mechanic's lien.
With the Flexbase payment reminder system, your clients will receive regular communication regarding payments, such as:
- Automatically sending payment reminders via SMS and email to all of the contacts listed for that client as well as any third-party contacts involved, like an architect, for example.
- Our system automatically sends all contacts payment reminders every few days.
- If you’ve sent multiple reminders and no payment has been received, then we’ll ask for your approval to send a certified mail letter containing an intent to file a lien. We’ll overnight express via FedEx so that your client is immediately informed.
- If after all of this, they still don’t pay, we’ll file a mechanic's lien with your approval.
With a lien on the property, you become first in line to get paid should the property sell or another party is granted title on the property.
And with a free Flexbase account, you’ll have access to more than 80 lending partners that could potentially buy that lien for you at a discounted rate, putting cash in your pocket sooner. It’s then up to the lender to negotiate directly with the client.
In addition to automating the entire payment process from start to finish, Flexbase also has a legal team ready to assist with mechanic's liens on a case by case basis.
We’ve made it our mission to get you paid sooner, and if you don’t get paid, we don’t get paid.
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