Mechanics Lien

By Gustan Cho

A mechanic’s lien on a property is when a contractor, sub-contractor, or supplier places a lien on a property they did work on or supplied materials to and the owner of the property did not pay for their services or supplies.  Depending on the county where the property is located at, contractors, sub-contractors, or suppliers of material can file a mechanics lien on a property if the property owner refuses to pay for their services.  A general contractor often times have multiple sub-contractors and suppliers and the property owner normally pays the general contractor and the general contractor then pays his sub-contractors and suppliers.  If a property owner pays the general contractor and the general contractor does not pay his sub-contractors and suppliers, the sub-contractors and suppliers can place a mechanics lien on the subject property even though the property owner has paid the contractor in full for his services and materials.

How To Avoid Mechanics Liens

If you as a homeowner plan on doing an extensive remodeling project like a room addition or complete gut rehab and hire a general contractor, make sure you get a list of all of the general contractor’s sub-contractors and material suppliers.  Before you make final payment, you need to get lien waivers from all sub-contractors and material suppliers who have done work on your home and supplied materials.  A lien waiver, or waiver of lien, is a documentation that the contractor, sub-contractor, or material supplier has been paid in full for the services that were performed.  There are many instances where the homeowner pays the general contractor in full for the work done on the homeowners property but the contractor does not pay his sub-contractors and suppliers and the homeowner ends up with a bunch of mechanic’s liens from sub-contractors and suppliers.  Even though the homeowner has paid the general contractor in full, the homeowner can get stuck with mechanics liens on his property if the general contractor has not paid his sub-contractors and suppliers.

What Happens If A Homeowner Has Mechanics Lien? Can Homeowner Still Sell Property?

A mechanic’s lien on a property is attached to the title of the home and can create a problem when it is time to sell the home.  However, there are ways around it where you can have a mechanics lien and still sell your home.  Title companies normally will override a mechanic’s lien if they can escrow the amount of lien in escrow.  The seller will need to put up the amount of the mechanic’s lien in an escrow account with the title company until the mechanic’s lien is resolved.  If there is no merit with the mechanics lien after the fact, the home seller will get his money back.  If the amount is negotiated with the vendor who placed a mechanic’s lien, then the settlement will be paid for by the title company holding the lien escrow and the balance will be returned to the seller.

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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