5 minute read • Upsolve is a nonprofit that helps you get out of debt with education and free debt relief tools, like our bankruptcy filing tool. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool
In a NutshellA mechanic’s lien is a legal tool tradespeople use to make sure they get paid for the work they do and the supplies they contribute to projects. They’re common when you book construction workers. If you’re having work done on your home, it’s good to be aware of these liens. If subcontractors or other workers don’t get paid, it can put your property at risk.
Chances are that you’ve hired a contractor to work on your house or brought your car into an auto mechanic’s garage to be repaired. Contractors and mechanics are just like any other worker in that they want to be paid in full, on time. They don’t want to have to chase anyone down to pay the bill.
Mechanics, general contractors, subcontractors, material suppliers, builders, and design professionals are able to use a mechanic’s lien to help them get paid promptly and in full. In this article, we’ll discuss what a mechanic’s lien is, how it’s used, and how you can avoid them.
A mechanic’s lien, also known as an artisan’s lien or a materialman’s lien, is a statutory lien used in the construction industry. It’s called a statutory lien because it happens automatically under state law in certain situations and relationships. Once work is done on your car or your house, for example, the lien immediately attaches to the property worked on or repaired. A mechanic’s lien may be used in building or construction projects and repair jobs. It’s a way to hold the property owner accountable for the payment of these services.
A mechanic’s lien is a legal claim that helps prevent nonpayment. It’s a tool to guarantee that builders, contractors, construction firms, and materials suppliers are paid for the work they do and the materials they use. A property owner usually has to acknowledge and agree when they sign the construction contract that a mechanic’s lien will be obtained by the contractor in order to book construction help on most types of projects. A contractor will typically require a mechanic’s lien, an upfront cash payment, or a large retainer before they’ll actually start on a project.
A mechanic’s lien is a way for subcontractors and suppliers to get paid for the improvements they have made to the property, whether real property like a house and land or personal property like a car, electronics, jewelry, etc. This ensures that workmen are paid before any other parties like a bank, credit union, or mortgage lender in case of a foreclosure and subsequent sheriff’s sale of the property. A mechanic’s lien would also ensure that an auto mechanic is paid before an auto lender if the borrower defaulted on the auto loan and there’s a repossession and public auction.
A mechanic’s lien can also be used when a general contractor hasn’t paid subcontractors, laborers, or suppliers. The homeowner is ultimately responsible for payment. If the homeowner pays the general contractor but the general contractor hasn’t paid the subcontractors, the homeowner may have to get involved to make sure the subcontractors get paid. Otherwise, the homeowner will have to deal with the mechanic’s lien. If the matter is cleared up, the homeowner will have a free and clear title to the property, unencumbered by a statutory lien like a mechanic’s lien.
As mentioned earlier, mechanic’s liens, like all statutory liens, occur automatically by law. The lien is effective until the project is completed and all workers have been paid in full. A lien is typically recorded at the county recorder’s office. It’s public record and will show up in a title search. If contractors and repairmen are not paid promptly and in full, they can enforce the mechanic’s lien to foreclose on your real estate or personal property. The contractor can force a foreclosure and sheriff’s sale (in the case of a home) or a repossession and public auction (in the case of a vehicle) to get paid.
Some property has multiple liens against it. In this case, a mechanic’s lien usually gets higher priority than other liens. That means if there’s a foreclosure or repossession and the property is sold to recoup costs, the contractor or laborer will be paid before other creditors that the property owner also owes. For example, say you have a house with a first and second mortgage that you have renovated by a general contractor who puts a mechanic’s lien on the property. Then the first mortgage lender forecloses on the home. The contractor who has the mechanic’s lien will likely get first priority in benign repaid, before the first or second mortgage holder.