A mechanic’s lien is a legal document that can be filed against property by a contractor or materials supplier as a way to get paid. A mechanic’s lien is frequently used by contractors and suppliers on construction projects when they have not been paid in full for the services they provided.
Once a lien is filed on a property, the lien encumbers the property owner’s title to the property until the lien is removed. Property owners have a range of options for getting a mechanic’s lien removed and clearing their title.
Ways To Remove A Mechanic’s Lien
Mechanic’s liens are governed by the law of the state where the property is located. States’ laws vary as to what contractors must do to have an enforceable lien, but every state recognizes contractors’ rights to file mechanic’s liens. Most states construe the laws strictly against the contractor, which means that the contractor must take care to comply with the laws or the lien will not be enforceable.
To be valid, the contractor must provide all of the information required by the state’s laws on the lien form. The contractor must also satisfy the applicable notice requirements and meet all deadlines for filing and enforcing the lien.
In every state, contractors have a deadline for filing a mechanic’s lien and every mechanic’s lien has an expiration date. If the contractor does not file by the deadline and initiate foreclosure proceedings before the lien expires, the lien is not enforceable.
Whether the lien is enforceable or not, the property owner needs to take steps to get it removed to have a clear title. Clear title will be necessary to sell the property or to get a mortgage on the property. Here are ways to remove the lien.
Resolve the Lien Claim by Paying the Contractor
Filing the lien will often induce the property owner to pay the amounts due. The property owner can resolve the lien by paying the amount owed if the property owner does not dispute the amounts owed. If the property owner disputes the amount outstanding based on any reason, such as the quality of work or the value of the services provided, the property owner can try to resolve it by negotiating the lien claim directly with the contractor without going to court.
This is usually the easiest way to remove a mechanic’s lien from a property. Most contractors will be more willing to negotiate the unpaid amounts rather than spend time and money on litigating a lien claim. Litigation is expensive, time-consuming, and unpredictable.
If the parties reach an agreement and the agreed upon payment is made, the contractor will cancel the lien by filing the lien cancellation form with the property records clerk. Cancelling the lien will clear the title.
Wait It Out
If time is not of the essence for the property owner, the property owner can wait and see if the contractor takes steps to enforce the lien. As noted earlier, state law gives the contractor a certain amount of time to enforce the lien.
To enforce the lien, the contractor in most states has to file a foreclosure action before the lien expires. If the contractor does file the legal action in time, the contractor loses their right to enforce the lien. The property owner can then initiate a legal action to clear title.
Note, however, that the expiration of the lien does not eliminate the contractor’s right to bring an action against the property owner for breach of contract. The contractor may bring an action for breach of contract any time before the state statute of limitations expires for that action. State laws give parties at least two years to bring such an action.
“Bond Off” the Lien
If a property owner needs to sell or refinance the property quickly, the property owner can obtain a bond from an insurance company that covers the lien amount. These are sometimes called surety bonds or lien discharge bonds. These bonds are available through any large insurance company.
With such a bond, the insurance company attests to the county clerk that the property owner can pay the mechanic’s lien if ultimately obligated to do so. The lien will be removed from the property. The contractor’s lien claim is then attached to the bond, rather than attached to the property. This clears the title and allows the property owner to mortgage or sell the property, though it does not settle the contractor’s underlying lien claim.
Litigation is the option of last resort. It is costly and time-consuming, and the outcome is far from certain, no matter how strong the parties believe their respective cases to be. If the property owner prevails in the litigation, the court may order the lien to be stricken from the property record.
For More Information about Mechanic’s Liens, Contact the Experts at Mathis Title
The title specialists at Mathis Title are experienced with clearing mechanic’s liens from title to property. Contact them today to find out how they can help you with your mechanic’s lien issues or any other title matters.