Contractor's Liens

Liens allow creditors to secure debt payments. Lenders file liens against real property by recording lien affidavits with county clerks who maintain property records. The lien attaches to property until full payment secures a release of lien. Until final payment on debt owed, the owner of the property remains liable for the amount of the lien and legal claims from the lienholder.

A contractor's lien is a claim made by original contractors or subcontractors who have performed work on a property, and have not yet been paid. This kind of lien claim may also be known as a:

• Mechanic's lien
• Construction lien
• Subcontractor's lien

Suppliers of materials (materialmen) may also file a mechanic's lien. In some states, professionals such as architects, engineers, and surveyors may also be entitled to lien rights. As unpaid creditors, they may file a lien for nonpayment of services rendered such as:

• Home improvement projects
• Construction contracts
• Landscaping or remodeling

The best way to avoid a contractor's lien is by paying your invoice on time. If you are unable to pay or need more time, you may be able to avoid a lien by talking to the contractor and negotiating a payment plan. After all, contractors would rather work out a deal than go through the hassle of filing a lien against your property.

This article focuses on contractor liens and lien laws affecting residential projects. See Understanding Mechanics' Liens and Contractors' Liens: Select State Laws for additional details.

Contractor's Liens: Priority and Waivers

The priority of liens on a construction project does not depend upon the time of completion of the particular job. Instead, everything relates back to the first visible commencement of the work. This means the final work, such as painting, is equal in priority to the initial work of laying a cement foundation. 

During the entire work of construction, the owner must obtain lien releases or waivers of lien from each subcontractor and material supplier. Without these waivers or releases, the real estate is subject to liens of all the subcontractors, even if the general contractor, though paid in full, fails to pay the subcontractors.

Disclaimer: It's important not to confuse the above with lien priority in general. The paragraph above refers to liens amongst contractors, subcontractors, and suppliers. There are different kinds of liens and not all of them pertain to real estate construction. Banks, for instance, might record liens on property under a mortgage is paid off. 

Depending on actual or constructive notice and recording dates, one party's lien may be senior to another's. States differ on the criteria that give priority to liens. Some states just require advance recordation, while others require that a lien be recorded first, and written notice be given before it is deemed senior to another lien. In other words, a contractor's lien may be junior to a third party's lien that was previously recorded and noticed.

Lien Notification

In some states, contractors and subcontractors must notify the property owner prior to filing a lien. In others, such liens can be filed without any notification to the owner. Lien claimants who are contractors or subcontractors are protected under this legal doctrine because all their materials and labor are "buried" in the real estate, having become part of it. 

Unlike mortgage liens, however, the liens of these claimants cannot force a foreclosure. Instead, homeowners are on the hook to pay construction lienholders upon selling or refinancing their properties. In the alternative, they can obtain lien waivers by paying off contractors.

Contractor's Liens: Additional Resources

State laws regarding contractor liens can get confusing. If you would like to do additional research after reading this article, click on the links below to learn more. Remember, if you are involved in real estate litigation, it is always wise to contact an attorney before making any major decisions regarding your case.

• Attorney Intake Form: Purchasing, Leasing, Or Selling A Home - Litigation
• Purchasing, Leasing, Or Selling A Home - Documents To Bring To Your Attorney
• Why You Need a Lawyer When You Buy or Sell a House

Hit With a Contractor's Lien? Get Professional Legal Help

If a contractor's lien has been filed against your home, your best course of action is to either pay the amount, if valid, or negotiate a long-term payment plan. If you're not sure whether it's valid or need additional legal advice, it may be a good idea to speak with a real estate attorney.