Category: Contractor

What Is a Contractor’s Lien and What Can a Homeowner Do About It

Imagine planning for remodeling and achieving it finally. You settle on the price with the contractor, and you work together through the period trying to figure out how to better your house. After the entire process, you find out that your contractor has placed a lien on your home because you have delayed the payments. 

What Is a Lien?

A contractor’s lien, commonly referred to as a mechanic’s lien or construction lien is a claim laid by either a contractor or subcontractor who does not receive payment on time after working on a property. A contractor’s lien can also be filed by a supplier who provided materials for your construction project. Other people who might file for a lien in some states include engineers, architects, and even surveyors. 

In most cases, liens can serve as an impediment stopping you from making a sale of your home or, in some cases, refinance it through the bank by forcing your hand to sell your home. The latter is usually highly unusual and can be rarely done. 

Can I Do Away With a Lien?

There are many options to consider if you are looking to get rid of a lien. Here are some of the options that you should consider:

1. Pay Your Invoice on Time

This is one of the preemptive measures you can take to avoid a lien. However, if you see a circumstance that you will default on the payment, call your contractor immediately to renegotiate on how to pay up. Getting your contractor to the table might even be a plus for them because filling a lien is a strenuous activity even for them.

2. Request for an Affidavit Stating Release of Lien

Before making payment (both partial or final payment), you can request your contractor to sign an affidavit stating Release of Lien. This will indicate that the contractor has made payments to his laborers or provide a list of people they owe money to and the amount due. If you are the one paying subcontractors or laborers personally, then get a full Release of lien and an affidavit stating the same.

3. Request for a Written Agreement

In some states, it is not a requirement to ask for a written statement. So demand to have one with your contractor. Ensure that the contract is well elaborate and concise. Include the project’s nitty-gritty requirements, including how much it will cost for the whole project—asking for your lawyer’s advice to check before signing can come in handy for you.

How Can I Get Out of the Lien if It Has Already Been Filed?

If your contractor has already drawn up the paperwork for a lien, then here are some of the ways you can make it go away.

1. What Is a Contractor’s Lien and What Can a Homeowner Do About It 

If you two can work together to agree on a price, then you can try to find a way to void a lien. This is an easy, cheap, and very common way of doing away with a lien. However, negotiating might mean you will have to pay the contractor some money to get rid of the lien. 

Look for ways to ensure both of you benefit from this entire process. Suggest to your contractor paying a lump sum at once for a quick payment at a later date. You can also suggest paying your contractor in installments over some time. If that does not work, suggest adding extra work in exchange for more pay later. 

When you finally settle, there is an easy and swift change for the contractor to release the lien. The Release of Lien is usually a notarized document indicating the contractor has released the lien and must be accepted by the same county clerk who initially approved it. 

2. File a Lien Bond With the County To Have the Lien Removed

Being the property owner, you have the power to get a bond from an insurance company that covers the lien amount. They can come in the form of lien discharge bonds or surety bonds.

Through the use of the bond, the surety company is a form assuring the county clerk that you are going to pay for the lien if you are mandated to. This, in turn, eliminates the lien from your property and the person who filed for a lien becomes attached to the bond and not the property. This whole procedure is commonly referred to as “bonding off” the lien

Getting a bond can be a complicated procedure sometimes, and hence you are sometimes advised to meet up with the insurance company to determine the type of bond that will be good for your current situation. It is important to keep in mind that to remove a lien, you must move quickly and file immediately if you want to resell or avoid refinancing your home.

3. Go To Court

This should be the last resort if you fail to reach an agreement with your contractor or cannot get your insurance firm to give you a bond. Depending on states and jurisdictions, you can file for a motion to have the lien vacated or discharged.

Getting a real estate or construction lawyer might be better off for you and might give you a fighting chance in court. The lawsuit usually requires the contractor to prove that you owe them money. It will also require you to provide the court with evidence that you do not owe money or that the contractor did a lousy job, or the construction is not complete.

If you manage to prove the case, the court will order that the lien’s striking from your property’s record. In some cases, you may also be awarded.

By 2021-05-18.    Architect, Contractor