Contractors and even subcontractors have an extraordinary remedy if they're not paid for the job they do on residential property: a mechanic's lien. All states have mechanic's liens, although some call them contractor's or construction liens, to ensure that the homeowner pays the general contractor or the subcontractor.
Homeowners who have a mechanic's lien on their property are often concerned about how long the lien remains and what they can do to remove it. Getting a lien is an unpleasant experience, and the homeowner can't sell or refinance easily with a lien on their property.
Basics of a Mechanic's Lien
A mechanic's lien is a legal document for a specific monetary amount that a general contractor or a subcontractor files against the owner's property in the event the contractor hasn't been paid. Such a lien attaches to the property and not to the person, so if the homeowner moves, the lien does not follow them to their next home. However, if the owner tries to sell or refinance their house, they will have difficulty doing so if the amount of the lien hasn't been paid.
If you're a subcontractor, even if you didn't deal with the homeowner directly but supplied materials to the general contractor, you may have the right to file a mechanic's lien against the property if the contractor hasn't paid you. A general contractor's contract with the homeowner, however, may contain a clause preventing you from filing a mechanic's lien, so check the contract to find out if this remedy is available to you.
Before filing a lien, contractors are generally required to send a preliminary notice, which is a notification to the homeowner, any lenders, and any other contractors or subcontractors of the intent to file. Each state has different requirements, as do many counties within each state, as to whether and when you must send a preliminary notice.
In most states and counties, the time limit to send the notification is quite short, often 20 days after completion of the job. Some states don't require completion but allow you to send a preliminary notice after you've supplied the materials and haven't been paid. If you're not sure when or whether you need to send the notice, check with the Land Records Office, County Register of Deeds, the county clerk, or similar office in the county where the property is located, or with a business, real estate, or construction attorney.
How Mechanic's Liens Work
As a contractor, you first send a notice of lien to the homeowner that you're filing a lien. The notice of lien is in addition to the preliminary notice. Once you record the lien with the County Register of Deeds, prospective buyers and lenders are put on notice that the property is encumbered with a lien.
It's important to note that mechanic's liens are of limited duration, often no longer than 90 days, but in some states they last six months to a year. If you're a contractor, you have limited time to enforce the lien by filing a claim in the county where the property is located, followed by a lawsuit for foreclosure if you can't get the homeowner to pay what's owed. When the lien expires, you can no longer enforce the lien by foreclosing on the property.
Removing a Mechanic's Lien
As a contractor, you have the duty to remove the lien from the property once you've been paid. If you're the homeowner, you want to make sure the contractor has removed the lien so that your title becomes free and clear of all defects. Just because a lien remains on the property doesn't mean it's enforceable, but the contractor must remove the lien prior to any sale or refinancing.
If the contractor hasn't removed the lien by recording a release of mechanic's lien, the homeowner can try negotiating with the contractor or file a lawsuit to get the contractor to remove the lien.
To avoid getting liens in the first place, homeowners should use reputable contractors and pay them pursuant to the terms of your contract. You can also try working with the contractor to get a lien waiver so that you both agree the contractor won't file a lien in the future.
If there's an issue about poor workmanship, you may be tempted to withhold payment until the contractor fixes the problem, but you could receive a mechanic's lien if you do. In such situations, consider consulting a business attorney.