Description

• A mechanic's lien is a form of security, an interest in the title to a piece of real estate property. The lien benefits those who have performed work to build or improve the property. A lien can be specific, such as a construction lien, supplier's lien or a laborer's or design professional's lien. Mechanic's liens date from the 18th century, and the word lien originates from a French word that roughly translates as "to bind." Mechanic's liens exist to protect contractors and other workers on a construction project, and to enforce payment for work performed. Each state has its own legislation regarding liens, although there are similarities among liens overall.
  
  

Creation

• Persons performing certain types of work, or supplying materials for a property project, usually create a mechanic's lien. States vary regarding the types of work, and some examples are carpenters, laborers, plumbers, electricians, mechanical or HVAC contractors, architects and others. Other parties to these liens can include lumberyards, electrical supply houses, plumbing suppliers and professionals such as the civil engineers involved in drawing up the plans for construction. Also included are any businesses that fabricate items offsite that eventually get incorporated into a property project. There are no simple rules that apply to every state regarding the validity or application of a mechanic's lien; deciding whether a lien is legitimate may mean examining records of previous liens rejected or upheld in the state in question.
  
  

Perfecting A Lien

• In construction projects, the subcontractors have a contract with the general contractor for payment, even though they do not have an agreement directly with the landowner. This entitles subcontractors and suppliers to place a lien on the property to encourage the general contractor to pay them. To enforce a lien, it usually needs to be "perfected." It must be filed in accordance with the state requirements regarding the maintenance and enforcement of the lien. There is a time limit for these requirements, and they serve to provide a property owner with preliminary notice regarding a worker's right to place a lien on the property. Also required is the filing of a notice when work commences, and filing of a notice in the appropriate public records offices regarding intention to place a lien for nonpayment. Additionally, a notice must be filed in the public records office within a certain time period after work has been performed or materials supplied and a lawsuit filed if necessary, to cause foreclosure on the property to satisfy the lien within a certain period of time.
  
  

Enforcement

• Mechanic's liens have high priority relative to other parties' interests in a real estate title. This means they have higher priority for payment in a foreclosure sale. Selling the property, usually through foreclosure or similar court proceedings, enforces mechanic's liens. Liens seem attractive as they are secured by real, tangible property; however, actual enforcement of liens becomes much more difficult. The process is a long one, and lenders usually have priority over lien-holders. When selling a property in a tough housing market, there may not be enough money to pay off the lien after the lender is repaid. The contractor must also pay the legal costs of enforcing the lien.