Getting paid in the private construction business — whether it involves a particularly evasive general contractor or an owner who’s in a tight financial spot — can be a challenge. Fortunately, no matter the size of their legal budgets, contractors have an alternative to waiting out a check indefinitely, and it’s called a mechanic’s lien.
Mechanic’s liens, usually the collection tool of last resort, protect a contractor’s interests by creating an encumbrance, or monetary claim, on the project property, be it commercial or residential. The lien is public record, and, much like a loan on a vehicle or a mortgage, it must be satisfied — paid— before the owner can provide clear title to a buyer or another lender in case of a refinance. Unlike a home or auto loan, however, mechanic’s liens exist specifically to ensure that those who provide services and materials to a construction project are paid.
Steps to filing a lien
In most states, the right for contractors to file a mechanic’s lien is not automatic, as there are some legal hurdles to jump. Usually within a certain timeframe, contractor must let the owner know in writing that they are providing services to the project, and notice has to be given in a way that can be proven down the road — such as certified mail, overnight delivery or hand delivery with a signed receipt.
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