A mechanics lien is a remedy used by contractors, subcontractors, or suppliers to resolve payment problems. A mechanics lien is a legal claim against the owner of the property being remodeled or improved. For instance, a supplier can place a lien against a homeowner if the homeowner is remodeling his bathroom and the general contractor does not pay the supplier for the bathtub they supplied. The supplier places the lien against the homeowner to recover his money.
This usually comes as a surprise to many homeowners because even though they actually already paid the general contractor for what was supplied, if the supplier is not paid, the law allows that they come after the homeowner since the supplies benefited their project. For this reason, homeowners need to be aware of mechanics liens. They also need to know how to avoid them.
Why Are Mechanics Liens Allowed?
It might come off as unfair to most people that the homeowner should be responsible for the general contractors’ irresponsibility. The rationale behind it is that between the homeowner whose property was improved and the supplier, the needs of the supplier to receive payment are greater. In addition to this, the homeowners’ property can be sold in order to satisfy the mechanics lien if the homeowner cannot afford to pay for the supplies.
According to the law, the homeowner can later sue the general contractor although this does not help them much, at least in the short run. This is because for a person, in this case, the general contractor, who fails to pay the suppliers, it will not be easy to get them to pay the homeowner. It will be a long process before everything is paid in full.
How Does A Mechanics Lien Work?
In order to get one, a supplier or subcontractor who was not paid by the general contractor will need to:
- Provide notice to the homeowner of all the contributions within 20-10 days
- If they are not paid by that time, they will file a mechanics lien in the same county as the property
- The supplier will have 2 to 6 months to work out a solution with the homeowner and if not file a lawsuit
If they do not file the lawsuit within that time, the lien will have no effect after that. At this point, it will be wise for the homeowner to get a court order to clear the lien because selling that property will become difficult later on.
How Do You Avoid A Mechanics Lien?
Pay joint checks- Paying joint checks to the general contractor and the supplier or the subcontractor will ensure everyone is paid from the word go.
Get a lien waiver- A property owner can have the contractor get a lien waiver for everyone who falls under him. The contractor should provide a waiver for all past payments before accepting another payment from the owner.
Paying the suppliers or subcontractors personally- Making direct payments to suppliers and subcontractors will help the property owner avoid a mechanics lien. However, this can be inconvenient because the property owner could look like the direct employer and would have to take responsibility for social security. It is best to work with the first two.
For more information about mechanics lien, visit here