Definition
A construction lien, also known as a mechanic’s lien, is a legal claim against a property by a contractor, subcontractor, or supplier who has provided labor or materials for work on that property but has not received payment. This lien ensures that the claimant has a legal right to compensation by securing an interest in the property’s value.
Detailed Explanation
Construction liens are commonly used in the construction industry to enforce payment in situations where contractors or suppliers have provided services or materials but have not been compensated. Filing a lien involves placing a formal notice on the real property’s public records, signaling that the property owner owes money for work performed or materials provided. This can impede the property owner’s ability to refinance or sell the property until the debt is settled or the lien is removed.
Examples
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Example 1: Lumber Depot supplied hardwood flooring to an installer on credit, but Lumber Depot was not paid. Therefore, Lumber Depot places a construction lien on the homeowner’s property to secure payment. The homeowner, who paid the installer in full but was unaware of the lack of payment to Lumber Depot, finds the lien valid under the law.
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Example 2: A plumbing subcontractor who installed a new plumbing system in a commercial building was not paid by the general contractor. The subcontractor has the right to file a construction lien against the commercial property to ensure payment for their labor and materials.
Frequently Asked Questions (FAQs)
Q1: Who can file a construction lien?
- A: Contractors, subcontractors, laborers, equipment lessors, and material suppliers who have not been paid for their contributions to a construction project can file a construction lien.
Q2: How long do you have to file a construction lien?
- A: The timeframe to file a construction lien varies by jurisdiction, but it is typically between 60 to 120 days from the last date of supplying labor or materials. It’s important to check local laws for specifics.
Q3: What happens once a construction lien is filed?
- A: Once filed, the lien appears in the public records and clouds the property title, making it difficult for the owner to sell or refinance until the lien is resolved (either by payment or through legal action).
Q4: Can a property owner remove a construction lien?
- A: Yes, property owners usually need to pay the amount owed either directly or through a settlement to have the lien removed. Alternatively, they could dispute the lien in court if they believe it was unjustly placed.
Q5: How does a construction lien affect property valuation?
- A: A construction lien typically does not affect property market value but can deter potential buyers and lenders because it secures a portion of the property’s value and can lead to foreclosure if not resolved.
Related Terms
- Mechanic’s Lien: Another term for a construction lien, highlighting its use by individuals who have worked on or supplied materials for a project.
- Lien Waiver: A document from the contractor, subcontractor, materials supplier or other party to the property owner, waiving any future lien rights upon receipt of payment.
- Notice of Commencement: A document indicating the beginning of a construction project, which helps establish lien rights for contractors and suppliers.
- Notice to Owner: A preliminary notice sent by a subcontractor or supplier to inform the property owner of their involvement in the project and potential lien rights.
Online Resources
- Nolo (Legal Encyclopedia) - Understanding Mechanic’s Liens
- FindLaw - Mechanic’s Lien Law
- The Balance - Construction Lien: What Homeowners Need to Know
References
- Nolo’s Guide to Real Estate Legal Issues by Ralph Warner.
- Self-Help Law Kit for Dummies by John Ventura.
- The Construction Lawyer’s Guide to Mechanics Liens (Ebook) by the American Bar Association.
Recommended Books
- “Nolo’s Legal Guide to Home Remodeling” by Joseph L. Matthews and Paul Bianchina.
- “Construction Law” by Phillip E. Morrison.
- “Builders and Contractors Guide to Mechanics Liens” by Kurt Weisenberger.
