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WHAT IS A CONSTRUCTION LIEN?
The construction industry is competitive. To succeed, one needs to have a commendable work ethic, superb problem-solving abilities, and a commitment to providing excellent customer service. Most contractors would tell you that realizing their customer’s’ visions is worth it if you ask them about it.
When the check is deposited into the bank account, it’s even better. A contractor has a right to compensation when they work on a customer’s property. That is the sole justification for construction liens.
What happens if contractors aren’t paid? It is hard to believe that it still happens, but people in this world don’t uphold their end of the bargain. The contractor may do the work per the contract, but the customer would still be unwilling to pay.
A contractor may need to file a Construction Lien in these circumstances to obtain any payment due to them for their work. Here, we will explain a Construction Lien, the rules for construction liens, and the different ways they may be used.
A Mechanic’s Lien, often referred to as a Construction Lien, is a security interest on a real estate granted to contractors, suppliers, and other parties to collect payment on construction projects.
Every U.S. State has Construction Lien laws in place that specify the Notices to be given, due dates, and steps contractors must take submit a lien claim and how to file it.
A contractor, subcontractor, building material supplier, equipment or labor provider, who has not received payment for a job done on a property may file a claim for a Construction Lien. It is intended to protect contractors and other professionals in the construction industry from the possibility of not being paid for their work.
A Construction Lien clouds the title of a property, making it hard or impossible to sell or get refinancing. In the worst instance, it can compel the house to be sold to pay the compensation owed to the contractor or subcontractor.
Refusing to make the payment will only fix the problem if a property owner is happy with the work performed by a contractor or other professional; the law does not allow it though. The property owner may also be responsible for paying subcontractors used by the contractor to perform a part of the job but were not paid for their work; a Mechanic’s Lien may be used in both these scenarios to guarantee payment.
A Mechanic’s Lien must typically be filed within two months of the completion date of the contentious project, depending of the State where the job was performed. Suppliers and subcontractors may also file liens in addition to general contractors on a contract with the property owners.
In other words, if a general contractor receives payment but neglects to pay suppliers or subcontractors, the suppliers and subs themselves may use a Construction Lien to compel payment. Property owners should be conscious of this and ensure they have access to all invoices and relevant payment documentation related to a construction project along with a Joint Check Agrement for both General Contractor and Sub-contractors to sign. Payments must be made to suppliers and subcontractors to avoid issues for the property owner.
Different states approach Construction Liens in varied ways. The contract that specifies the kind of construction and the work to be done must typically be included when filing a Construction Lien. The Contractor, equipment rental, material supplier or professional has the right to record the lien within the time frame allowed by the State.
A Construction Lien or Mechanic’s Lien can often only be filed if a written agreement specifies the type of work to be undertaken, the materials to be used, and the agreed-upon amount for the job, and a Preliminary Notice to Owner has already been provided for the job However, State laws differ, so it is best to check the law on construction liens in your state before filing a mechanic’s lien.
A Construction Lien is one of the most effective payment instruments in a contractor’s or supplier’s administrative toolbox since it offers many advantages to both parties. Here are some of the ways a construction lien may be used.
A contractor typically has a right to compensation for their time, materials, and labor when they make improvements to real property. The contractor may put a Construction Lien on the property if the landlord or hiring party chooses not to pay them.
You should know that the lien is against the property, not the owner. Selling or refinancing the property might be extremely challenging because the debt is attached to it and it must be paid off, in order to clear its title. Should the project’s owner require additional funding to complete it, it may be challenging to find new funding sources without paying off the previous debt.
To be entitled to file a Mechanic’s Lien, the contractor must fulfill several standards, which differ from state to state. However, in most states, the recorder’s or the clerk’s office in the county where the project is located is where the contractor files the construction lien. As a result, the lien is now included in the public property records and anyone can search for it.
Anyone involved in making alterations to a property is eligible to file what is also referred to as a Construction Lien or a Mechanic’s Lien, as long as a Preliminary Notice to Owner has been provided. Be ware of Mechanic’s Lien forms filed by unlicensed contractors or on projects that Preliminary Notices were NOT provided and without a proper procedure being followed. These requirementscan apply to those working on construction project, providing rental construction equipment, labor and materials used in a construction project and attorneys defending their property owner clients can be a stickler with the laws and procedures, trying to find any loophole.
For all these parties involved in the project, the i-Lien software makes it possible to prepare Mechanic’s Lien forms without spending too much time or effort on it, since the software maintains a database of the parties involved, dollars and dates and it is as easy as selecting the form to print from its menu. The i-Lien software automates and streamlines the process of creating Construction Lien Notices & Mechanic’s Lien documents to save time, safeguard your rights, and to quickly help you get paid!