Mechanic's Liens: Getting Paid and Lien Removal

Getting Paid

(From the Contractor or Subcontractor's Point of View)

The purpose of filing a mechanic's lien is to secure payment to a contractor or subcontractor for work done at a specific job site or to make sure a vendor of materials who supplies building materials for use at a job site, gets paid for those materials. Some types of laborers such as Architects, Engineers and Landscape Gardeners are also protected under the Lien Law.

  • A mechanic's lien is actually a document which gets filed in the County Clerk's office of the County where the job site is located. The lien will specifically mention, among other things, the name of the owner of the property which has been improved by the work and the address.
  • Because mechanic's liens affect the property owner's financial interest in the property as well as bank lending requirements, there are many detailed requirements including the written content of the lien as well as the timing of filing and the duration of the lien itself, which make complying with the Statutes which govern the Lien Law a challenge to those who are not familiar with Construction Law.

It is also important to note that while a general contractor usually has a written contract with a property owner which will allow the contractor to sue the owner in the event the contractor is not paid, a subcontractor, materialman or laborer usually has no contract with the property owner, making the immediate filing of the lien even more important.

Liens may also be filed for work done to improve public land and properties (i.e.: lands and property owned by states, counties towns, etc.).

Finally, if the owner still does not pay the person who filed the lien and improved the property (the lienor), then the lienor must start a lawsuit to foreclose the lien. This is a lawsuit similar to the foreclosure of a mortgage, like when a bank sues an owner. The purpose of the lien foreclosure action is to have the Court order the property to be sold to satisfy the lien.

Lien Removal

(From the Owner's Point of View)

From the owner's point of view, a lien can affect bank construction financing of a project and also hold up the sale or refinance of a property. Also, sometimes an owner may have paid the general contractor, but the general contractor may have failed or even refused to pay its subcontractors.

To avoid this problem, it is imperative for the owner to have previously placed a provision in its contract with its general contractor, that requires the general contractor to supply the owner with lien releases from the subs, before the general contractor gets paid, so as to avoid the sub from filing a lien in the first place. Also, sometimes an owner may rightfully refuse to pay a general contractor because the work was not done correctly or because the work was not completed on time.

Also, there are times when the general contractor or its sub may have provided substandard or incorrect materials. In any type of case, there are a number of remedies available to the owner.

  • First, if a subcontractor files a lien, an owner, on advice of its attorney, may stop paying the general contractor until the issue is resolved. An owner may also bond the lien or deposit funds into Court to have it removed.
  • The owner also has a right to demand and obtain a sworn statement called an "itemization of lien" from the company that filed the lien, which requires a full description of the work and materials which allegedly make up the lien.
  • The owner can also immediately go into Court and have a lien discharged if it is defective or if it has expired and has not been properly extended. This happens many times when a lien is not prepared or properly monitored by an attorney.

There are also severe monetary penalties which can be imposed upon the lienor, for willfully exaggerating the amount of the lien. An owner may also choose to allow a lien to expire, or if an owner believes the work constituting the lien was defective, the owner may assert any available defense in the lien foreclosure action that it would have in a breach of contract action.

Many times, however, liens can be resolved by communication and the assistance of an effective construction attorney such as Michael P. Berkley, Esq.

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