Although I have written about mechanic’s liens in the past, the power of a lien cannot be underestimated and bears repeating. The right to file a lien is a huge advantage for contractors and construction companies, and is a unique tool that helps contractors get paid. As long as the construction company has a written contract with the owner, it can file a lien on a property within ninety days of the date the it last worked at the project. If the contractor is a subcontractor, the time for filing is extended to within ninety days of the last date that someone working by and through the general contractor worked at the project. These deadlines are strict, and if they are missed, then the company can no longer file a valid mechanic’s lien.
A lien consists of two documents; a Notice of Contract and a Statement of Account. The Notice of Contract may be filed at the Registry of Deeds at the start of a project to put the public on notice that the company is working at the property. The Statement of Account provides the details of the contract price, the amount paid, and the amount still owed. The lien is a public record that states money is still owed for work on the property. These two documents constitute the mechanic’s lien.
What does a lien do? A lien causes a blemish on the title. What this means is if the owner has a construction loan, or is trying to refinance or sell the property, the bank will not disburse funds until the lien is removed. Even if a property owner is not trying to currently sell or refinance, most owners hate having a lien on their property. They are usually extremely motivated to have the lien removed.
There are only three ways to have a lien dissolved. One is to settle with the general or subcontractor and have them file a Notice of Dissolution of Lien. The second is to go to court to have the lien removed because the construction company did not follow the proper procedure for “perfecting” or finalizing the lien. If the lien is filed too late, the company fails to file suit within ninety days of recording the lien, or if the lien fails in some other way, the owner can file suit to have the lien dissolved. Finally, the owner can purchase a bond to “bond off” the lien, but this is usually a costly remedy.
If a construction company misses the window for filing a lien, it can still move for a real estate attachment, but this requires filing an action with the court, and it must show a “likelihood of success on the merits.” A mechanic’s lien can be filed by a contractor as of right; a party can only file a real estate attachment if a court grants them the right to do so. That is why a mechanic’s lien is a tool that cannot be ignored.
Liens can be an incredibly powerful tool when a contractor or construction company is owed money. However, unlike most legal actions, the contractor may lose his opportunity to record a valid lien if he does not follow the proper procedures.