5 factors that showcase why Mechanics lien is effective

What does it mean?

A mechanics lien is a contract that ensures general contractors and subcontractors who work on a property receive payment for their services and supplies. Filing of a lien restricts the owner from transferring the property rights without paying the lien claimant first. The lien claimant is also entitled to foreclose on the contract and sell the property, and utilize the proceeds from the transaction to settle the amount outstanding.

How does it work?

A mechanics lien is generally very effective at getting claimants paid timely. Here are some ways in which a lien can prompt the payment.

• It restricts the property

When a lien is filed, the property becomes the claimant’s collateral. This means that the property owners are legally denied their rights to sell, refinance or transfer their property without paying the claimant, and the property can also be auctioned off to cover the amount owed.

• It gets the owner’s attention

Because of the indirect association property owners have with general contractors or subcontractors, they are often unfamiliar with them and their problems. Filing a lien requires providing preliminary notice to the owner which makes them aware of the payment issues, making it more likely for a claimant to be paid.

• It breaches the contract

No construction project is ever without its fair share of contracts, almost all of which have terms that mandate parties to keep the property clear of liens. Once a lien is filed, it raises concerns regarding breach of contract and puts pressure on the breaching party to settle the lien claim.

• It affects more parties to pay

The claimant is authorized to file a lien against multiple parties, for e.g., an unpaid supplier can file suit against the general contractor, the property owner, and the property itself. By obligating more parties to pay the debt, the likelihood of the claimant getting paid is increased.

• It is extremely hard to challenge

In most states, claimants are also authorized to add legal costs such as attorney fees, collection charges, filing charges, interest and other expenses on top of the lien. This is why judgment enforcement of a lien is usually very risky for the property owners to dispute the claim because if they refuse to pay, they’d be subjected to more expenses every day.

A mechanics lien is an excellent tool for contractors, subcontractors, and others related to the construction industry. With the lien, they can be assured of getting paid for their labor and resources used on the improvement of a property.

And because of the nature of the lien, property owners must be informed of the process and manage payments timely so they can avoid financial and legal pitfalls.