Almost everybody has heard of a mechanic’s lien but most people cannot tell you what it is. Despite its name, it is not a lien placed by an auto mechanic (those do exist and aren’t called mechanics liens but that is a story for another day).
A mechanics lien is a lien placed on real estate by a person or company that supplies improvements to the real estate but is not paid. For instance, if a plumber repairs a leaking pipe and then is not paid, he can file a lien against the property but must do so within 90 days of the last day he worked on the property.
Interestingly, this can be done without a court order. Property can be liened simply on the strength of a statement signed under oath attesting to the debt. Of course, a party who has a lien wrongfully placed on their property can apply to a Court for a release of the lien.
Mechanics liens come up frequently in the context of new construction since so many people and companies have supplied materials and labor that went into the construction of the house.
Many people who have bought new houses and paid for them in full have been surprised to have liens placed against the property after the closing due to the builder not paying all of the subcontractors. This may occur since the lien may be placed against the property even if the owner is different from the person who requests the work to be done.
Many attorneys recommend that buyers of new homes purchase title insurance to protect against the risk of a mechanic’s lien. Title insurance will defend a claim made by a lienor and will pay any loss incurred as a result of the lien. Attorneys also require that the builder supply a mechanics lien waiver, which is a document, signed by all parties who may have a right to lien in which they give up their lien rights.
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