If you are a contractor, subcontractor, or supplier, a mechanic’s liens can be a valuable way for you to ensure that you receive proper compensation for any work or supplies you provide to a home. A mechanics lien is a legal claim against a property that has been remodeled or improved. They are legal documents that reserve the rights of the filer (you) to seek unpaid compensation. They are typically filed by contractors, subcontractors, or suppliers when they have not received payment for the work they performed or the materials that they have provided on the Property.
Explaining Mechanic’s Liens
Mechanic’s liens create a cloud on the title, which means that it will appear in the public property records. If the owner of the property does not pay off the mechanic’s lien, the lien will stay with the property. This comes into play when the property owner attempts to sell, as they must be resolved before ownership of the property can change hands. Banks and lenders are usually not willing to refinance homes or lend against property that has liens. Unresolved Mechanic’s liens can threaten real estate transactions, and they could potentially pose a threat to the property owner’s claim to their title. Because of these reasons, many homeowners can feel motivated to get rid of a mechanic’s lien before they ever even decide to sell their home.
However, if the lien is not resolved when it comes time for the property to be sold it is very common for title companies to have to deal with them. One job of the title company is to ensure that the buyer of the property is receiving a title free and clear of any previous liens. The title company will contact the mechanic’s lien holder to request a payoff (the amount that will satisfy the lien). Typically, the amount will then be held back from the sale transaction to satisfy the lien. The money will go directly to the lien holder.
For example, a subcontractor has placed a mechanic’s lien on a house with the intent to receive payment for 5,000 of work. The property the mechanic’s lien is on is being sold for 100,000. The title company will take the 100,000 from the buyer and then deliver 5,000 to the seller. The title company would then pay the 5,000 dollars to the lien holder.
Benefits of A Mechanic’s Lien
If you are a contractor, subcontractor, or supplier, utilizing a mechanic’s lien can be very beneficial to you. The most obvious way is that it ensures you receive payment. A mechanic’s lien will guarantee that you receive payment for the labor or materials you provide on a remodel, repair, on a construction project by encumbering the property. Mechanic’s Liens are public record and will appear on a title search for a property. This means that when the property owner goes to sell the property, they are going to have a very difficult time moving forward with a lien on the property. In some states, the mechanic’s liens can even take priority over the lender’s interest. This can be very helpful, as the lender will usually step in and demand action from the property owner because they also want to get paid. Mechanic’s liens can be a far more effective way for you to seek compensation as opposed to filing a lawsuit. Mechanic’s liens also set a specific deadline for when litigation will start if the payment has not been received, and often times the threat of a lawsuit can convince the homeowner to go ahead and pay off the lien. If you file your mechanic’s lien properly, it can be difficult for the homeowner to challenge them.
Another major benefit is that even before the property is put up for sale, the lender will require the owner to make the lien go away so that they can maintain a clear security interest in the property. This could help you get paid sooner. If the homeowner is unable to pay you, the lien will allow you legal right to collect from the real estate. Most importantly, filing a mechanics lien sends a message to all parties involved that you are serious about collecting payment and that you will seek legal action to receive it.
Reach Out To Mathis Title Company
To help you file your mechanic’s lien on a property or to have one removed, be sure to reach out to a Northern Virginia title company, like Robin Mathis at Mathis Title Company. She is an experienced attorney who can help assist with the filing process and the steps following the claim filing to ensure that everything is done correctly and that you receive the payment you are rightfully due. Having her on your side as you go through the mechanic’s lien filing process can be invaluable in securing a favorable outcome for you. Be sure to reach out to Mathis Title for more information.