What is a Mechanic's Lien?
A mechanic's lien is a powerful tool for helping you get paid if you furnish labor, materials, equipment, or services to a project where a building is being built or renovated on real estate. It is a claim made against a property by a contractor or subcontractor who has not been paid for work done on that property. Mechanic's liens can be used by auto mechanics, construction contractors and subcontractors, and material suppliers for construction projects.
What does a Mechanic's Lien do?
In short, filing a mechanic's lien against a piece of property helps you get paid, and it does so by creating a cloud on the title to property. If you are a general contractor filing a lien against the property, the lien creates a situation where the property owner is effectively prevented from selling or refinancing the property until you get paid and execute a lien release for them. If you are a subcontractor filing a lien against the property, the lien creates a situation where the property owner may not pay the general contractor before you assure the property owner that you have been paid by the general contractor and execute a lien release.
How do I get a Mechanic's Lien on a piece of property?
The steps you must follow to make sure a mechanic's lien is valid depend on who you are in the contract chain. You are an original contractor if you have a contract directly with the owner; you are a first-tier subcontractor if you have a contract with the original contractor; and, you are a second-tier (or lower) subcontractor if you have a contract with a sub-contractor.
If you are an original contractor, to create a valid lien you must do two things: 1) file a lien affidavit with the county clerk for the county in which the property is located; and 2) send a copy of the affidavit within 5 days of its filing to the property owner.
If you are a first- or second-tier subcontractor, to create a valid lien you must do three things: 1) file the lien affidavit mentioned above; 2) send a copy of the affidavit within 5 days of its filing to the property owner and original contractor; and 3) send a copy of a notice of unpaid claims by certified mail to the property owner and original contractor.
All of these steps must be done by exactly the right time or you will lose the ability to create a valid mechanic's lien and give up a number of rights that will help you get paid.
I have a Mechanic's Lien on a piece of property, now what?
Once a mechanic's lien is recorded in the county clerk's office, it appears on a title search of the property and often puts one contracting party in breach of contract. This creates pressure to resolve the lien claim ASAP. If done correctly, it also allows you to file suit against more parties than you could have sued in a simple breach of contract lawsuit. In a breach of contract suit, you can only sue the contractor or subcontractor directly in contract with you, but with the mechanic's lien, you can now sue the general contractor, any subcontractors above you in the chain, and the property owner. If the property owner or general contractor won't pay, you also have the ability to sell the property at auction to satisfy the debt. If the property owner decides to declare bankruptcy, your debt is considered secured, and you will be at the top of the list of creditors to get paid in the bankruptcy.
Why should I hire an attorney to help with a mechanic's lien?
As a contractor, your livelihood and your cash flow are at stake anytime you take on a construction project. You have every right to expect prompt payment, but when that does not happen, the attorneys at Hixson & Stringham can assist you in many ways:
- Preparing and filing mechanic's lien affidavits
- Writing and sending demand letters designed to trap funds and project retainers
- Foreclosing mechanic's liens through litigation
- Prosecuting and defending construction project disputes
- Representing contractors when the property owner, contractor, or subcontractor files for bankruptcy
In addition to the actions above, the attorneys at Hixson & Stringham can also defend against unjustified mechanic's lien claims.
We are just a phone call away at (817) 261-5000 or click the following link to set up a FREE 15 minute consultation. We're ready to answer whatever questions you have.