One of the most important legal protections granted to contractors and subcontractors is the ability to lien property on which the contractor or subcontractor works or provides materials. The right to lien is called a mechanic's lien, and state laws closely regulate the procedure for claiming and enforcing a mechanic's lien.
Lien Rights Generally
Contractors, subcontractors and materials suppliers, all of which are collectively referred to as "mechanics," have the right to lien any property that benefits from their services or materials. A lien is a legal claim to the subject property. If the mechanic does not get paid for his work on a project, then he has the right to lien the subject property until he has been fully paid.
State Database Registries
Some states have enacted regulatory mechanisms regarding enforcing mechanics' liens. In Utah, for example, and like many other states, a mechanic must file a formal Notice of Commencement for the subject property on the State Construction Registry. The Notice of Commencement informs the owner and the general contractor that the subcontractor or supplier has provided work on, or materials to, the property. Failure to file a Notice of Commencement on the state database could result in the loss of a mechanic's right to assert a lien on a property, so it is important that subcontractors learn whether their state laws implement a state construction registry database.
Notice of Lien
State laws also typically require mechanics to file formal Notices of Liens within a certain amount of time after the mechanic has invoiced but has been unpaid for the materials or services provided to the subject property. In most states, the mechanic must record a copy of the Notice of Lien at the office of the local county recorder and on the state construction registry. Again, failure to file a Notice of Lien within the requisite time frame can result in the mechanic's loss of the right to claim a lien on the subject property.
A mechanic's lien gives a subcontractor several important legal rights. In some states, mechanics have the option to foreclose on the subject property in order to raise money to pay off the mechanic's lien. Additionally, a mechanic's lien will remain attached to the property until the lien is fully paid off. This means that if the current owner of the property wants to sell the property, the owner will most likely have to pay off the lien before the sales transaction will occur. Most purchasers of property will not accept title to the property unless the title is free from liens.
- "Real Estate Finance Law"; Grant S. Nelson and Dale A. Whitman; 2008
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