
Mechanic's Lien
A mechanic’s lien is a guarantee of payment to builders, contractors, and construction firms that build or repair structures. The owner of a property may feel compelled to resolve a mechanic’s lien as soon as possible because a property typically cannot be sold while a lien is in effect. A mechanic's lien guarantees payment to builders, contractors, or construction firms that build or repair structures and other stakeholders involved in a construction project in the event of a liquidation. A mechanic's lien is also known as an artisan's lien or a materialmen's lien. A contractor might file a mechanic’s lien if a property owner reneges on paying a portion of the amount due for the work performed.

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What Is a Mechanic's Lien?
A mechanic’s lien is a guarantee of payment to builders, contractors, and construction firms that build or repair structures. Mechanic's liens also extend to suppliers of materials and subcontractors and cover building repairs as well. The lien ensures that the workmen are paid before anyone else in the event of a liquidation.




Understanding a Mechanic's Lien
Mechanic's liens are often necessary to secure construction help on a project. The lien stays in force until the project is finished and all construction personnel have been paid.
From an investment standpoint, it is important to note that mechanic's liens generally have a higher priority than other forms of debt. This priority determines the hierarchy of claims in the event of foreclosure or repossession.
The conceptual origin of a mechanic's lien goes back to the early days of the United States. The lien was first developed by Thomas Jefferson to create a landed gentry in the new nation. The U.S. had vast stretches of productive land and a mechanic's lien helped citizens monetize the land and build farms. The lien is called a mechanics lien because construction workers were referred to as mechanics (or people who work with their hands) in those days.
Mechanic's Lien Enforcement
A mechanic’s lien can be used to address both unpaid labor and material costs related to a construction project.
Each state has its own laws governing the specific types of costs that may be included when filing a mechanic’s liens. In addition, it's worth bearing in mind that there may be time constraints and statutes of limitations for filing a mechanic’s lien based on when the work was performed or when construction was completed.
A mechanic's lien is also known as an artisan's lien or a materialmen's lien.
The owner of a property may feel compelled to resolve a mechanic’s lien as soon as possible because a property typically cannot be sold while a lien is in effect. Any potential buyer of the property would see there is a lien in place when they perform a title search. Any new owner would be held responsible for addressing liens attached to the property.
A mechanic's lien must be distinguished from machinery liens or possessory liens. The former gives the owner the right to file a claim against a property or piece of real estate. The owner must follow due court process and cannot evict property holders from their land. Machinery liens give the owner the right to possess a piece of machinery, such as an automobile, for unpaid dues.
Example of a Mechanic's Lien
A contractor might file a mechanic’s lien if a property owner reneges on paying a portion of the amount due for the work performed. A subcontractor could likewise file a mechanic’s lien if a primary contractor fails to make proper payment for their work and materials.
For example, a contractor may hire a subcontractor to deliver and pour concrete to finish a portion of a construction project. The subcontractor has an agreement with the contractor but not the property owner. The subcontractor can file a mechanic’s lien if the contractor fails to pay for the concrete they provided for the project. The lien would be against the property, which would force the owner to get involved.
A separate breach of contract lawsuit could be filed directly against the delinquent contractor. This tactic would engage the property owner to also apply pressure to the contractor who has not paid the subcontractor.
Related terms:
Bid Bond
A bid bond is a debt secured by a bidder for a construction job, or similar type of bid-based selection process, for the purpose of providing a guarantee to the project owner that the bidder will take on the job if selected. read more
Bond Violation
A bond violation is a breach of the terms of a surety agreement where one party causes damage to the other. read more
Breach of Contract
A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. read more
Construction Bond
A construction bond is a type of surety bond used in construction projects to protect against an adverse event that causes disruptions or financial loss. read more
Construction Lien
A construction lien is a claim for payment made against a property by a contractor or subcontractor who supplied labor or materials for work done on it. read more
Economics : Overview, Types, & Indicators
Economics is a branch of social science focused on the production, distribution, and consumption of goods and services. read more
Foreclosure
Foreclosure is the legal process by which a lender seizes and sells a home or property after a borrower is unable to fulfill their repayment obligation. read more