Mechanic’s liens are a tool available to contractors and subcontractors to get paid for the labor or supplies they provide in connection with a construction project. Mechanic’s liens are governed by the law of the state where the project is located. State laws vary; however, there are some general principles that apply to nearly all mechanic’s liens.
What Is a Mechanic’s Lien?
A mechanic’s lien is a legal document that any contractor or any supplier who has worked on a construction project can file against the property title if the property owner or general contractor fails to pay for the work. The lien is filed in the office of the public land records in the county where the property is located. The lien operates as a cloud on the owner’s title.
If the property is encumbered by a valid mechanic’s lien, the owner may have a difficult time selling the property. The property owner may remedy the situation by paying the contractor before selling the property or expect to pay the contractor out of any sales proceeds. Every state authorizes a contractor to file a mechanic’s lien to secure payment.
How Does a Contractor File a Mechanic’s Lien?
A contractor who wants to file a mechanic’s lien for an unpaid bill must take care to follow the process outlined by state law. Failure to follow the state law procedures can result in an invalid and unenforceable mechanic’s lien.
In most states, the contractor has to provide two notices before filing the lien. The first notice is called the “preliminary notice”. The preliminary notice is usually served on the property owner at the beginning of the project. It notifies the property owner that a mechanic’s lien may be filed for failure to pay according to the contract terms.
The second notice is the “notice of intent to lien”. The notice of intent to lien must be served on the property owner to advise the property owner that the contractor intends to file a mechanic’s lien within a certain number of days unless the contractor is paid in full.
If the contractor remains unpaid after the two pre-lien notices are served, the contractor can file the mechanic’s lien. The contractor needs to follow the state’s laws regarding forms, supporting documentation, place of filing, and deadlines.
Additionally, the contractor will need to serve the lien documents on the property owner by hand delivery or by certified mail with return receipt, depending on what the applicable state law requires. In certain situations, the state law may require the contractor to serve the lien documents on other parties as well.
What Are the Benefits to a Contractor for Filing a Mechanic’s Lien?
Usually, the filing of a mechanic’s lien gets the attention of the property owner, who will in turn notify the general contractor (if one exists). It will also get the attention of any construction lender that is financing the project. A mechanics lien will threaten the priority of the lender’s security interest in the property, and the lender will demand action to resolve the lien.
Also, once a lien is put on a property, the lien may be evidence of a breach of contract as defined by the terms of the contract. A breach will induce the non-paying party to resolve the contractor’s lien claim quickly.
What Should the Property Owner Do If a Lien Is Filed on His or Her Property?
Once the property owner gets notice of the lien, he or she can pay the lien amount or challenge the validity of the lien or the underlying obligation. If the property owner pays the lien, the contractor will have to file a document that releases the lien.
To challenge the validity of the lien, the property owner or the property owner’s attorney should examine the lien to ensure that it complies with state law. If it does not, the lien may be invalid and unenforceable. If the property owner contests the underlying payment obligation, the property owner can bring a lawsuit or wait for the contractor to attempt to enforce the lien.
How Does the Contractor Enforce the Lien?
Frequently, filing the lien will prompt the property owner to pay the lien in full or initiate negotiations to settle a dispute over the amount due and pay it. Most mechanic’s lien claims get paid before the contractor has to bring a legal action in court to enforce it.
If not, the contractor will have to foreclose on the lien claim before the lien expires. Foreclosing on the lien claim will require bringing a lawsuit in court and following the state’s foreclosure procedures. Hiring an attorney is usually necessary. Merely filing the legal action will result in the contractor getting paid.
The contractor must act quickly and file the lien enforcement actions within the deadlines established by state law. The contractor’s failure to comply with the deadlines and failure to follow the rules regarding service of notice of the actions can result in the contractor losing its lien enforcement rights.
For More Information about Mechanic’s Liens in Virginia, Contact the Title Experts at Mathis Title
If you plan to sell your property and need a title search or if you have questions about any mechanic’ liens filed on your property, contact the title specialists at Mathis Title. They are experts in Virginia’s lien laws and can assist you in resolving your issue.