Though the name might make you think of car repair, Mechanic’s Liens play a significant role in construction disputes. Legally, they are most unusual, because it is rare for one private person to have the power to put a lien on property belonging to another person without the consent of the owner, or an order of an appropriate court.
What is a mechanic’s lien? In simplest terms, it is an interest in real property claimed by a contractor for work done for which he has not been paid. Its existence on a property will typically prevent any sale or refinancing until the lien is removed, or an agreement is reached with the contractor.
What kind of work can result in a mechanic’s lien? Any person can file a lien when he has a claim for more than ten dollars for materials furnished or services rendered: (i) in the construction, raising, removal or repairs of any building; (ii) in the improvement of any lot; (iii) in the site development or subdivision of any plot of land. The claim must arise out of an agreement with the owner, by consent of the owner, or by agreement with or consent of someone acting on the owner’s behalf.
What property does the lien cover? The lien will apply to the land on which the services were rendered, and any buildings on that land.
How is a mechanic’s lien imposed? The person performing the services files with the clerk of the town where the property is located a “certificate of lien” (A) describing the premises, the amount claimed as a lien thereon, the name or names of the person against whom the lien is being filed and the date of the commencement of the performance of services or furnishing of materials, (B) stating that the amount claimed is justly due, as nearly as the same can be ascertained, and (C) that is signed and sworn to by the lienor. The certificate must be filed within ninety days after the person has stopped performing the services, or providing the materials, at issue.
What must happen after the lien is filed? Within 30 days after filing the lien, the lienor must serve a copy on the owner of the property.
How does the mechanic’s lien get enforced? Typically the next step after filing a certifi-cate of mechanic’s lien is to start a lawsuit to foreclose the lien. If that lawsuit is successful, then the property can be sold, and all liens (including mortgages) are paid in order of priority. Such a sale might be the least common outcome. Where the owner has a mortgage, the commencement of an action to foreclose the mechanic’s lien often will result in an action to foreclose the mort-gage, which typically will become the main litigation. Perhaps most often, there is a resolution or settlement before the property is sold. The owner has the option to ask the court to lift the lien or reduce its amount, or to post a bond to substitute for the lien (which means that the contractor can’t sell the property if he wins, but can collect any judgment out of the bond.)
There are a number of other issues that arise commonly in the world of mechanic’s liens, including the extent to which subcontractors can file liens; the effect of the owner’s payment to the contractor on subcontractors’ rights; and priorities among various lien holders.
This is only a general overview of a legal matter that is governed quite closely by statute. There are a number of issues that need to be addressed, and steps taken, in the proper order, and at the proper time, or else the mechanic’s lien is ineffective (and could give rise to liability by the contractor to the owner).