WHAT IS A CONSTRUCTION LIEN AND HOW DO THEY WORK?

A construction lien, which is sometimes referred to as a mechanics’ lien, is a claim made by a contractor or subcontractor against a property when they have not been compensated for the work they did on that property. It is a powerful form of legal protection intended to give construction professionals leverage when they are not paid for their materials or services.

The existence of a construction lien will cloud a property’s title and prevent a property owner from selling or refinancing the property. Furthermore, the contractor or subcontractor who filed the lien can potentially foreclose on the lien and force a sale of the property. The proceeds of the sale will be used to compensate the contractor and any applicable subcontractors.

The laws governing construction liens vary by state. Generally, though, a contractor or subcontractor has the right to file a construction lien during the construction project or for a set period after the work is completed. Contractors and subcontractors often proactively file liens as a means of protecting themselves, even if there have been no payment issues to date.

Liens must be filed and recorded within periods specified by state law. Property owners must be served a copy of a lien within strict deadlines. If a contractor or subcontractor wishes to foreclose on a construction lien, they must also do so within a set time limit. Otherwise, the lien will become invalid and unenforceable.

To proactively avoid issues with construction liens, it is prudent to draft and sign thorough, enforceable contracts that clearly outline the scope of work, deliverables, contingencies, and terms of payment before work commences. A sound contract will work to protect all parties and should limit the possibility that a lien will become an issue. Our construction lien dispute attorneys can help you write, negotiate, and finalize comprehensive legal agreements as well as provide aggressive advocacy if a dispute arises during or after the construction process.

TYPES OF CONSTRUCTION LIEN DISPUTES

Again, contractors and subcontractors typically have the right to record a construction lien before any actual problem develops. The filing of a lien at this stage is not necessarily a sign of trouble.

A construction lien dispute should only arise if a contractor or subcontractor has not been paid for their work. There are cases where a property owner will simply refuse to compensate construction professionals for spurious reasons or in an effort to effectively steal their labor, but there are also scenarios where a property owner will have a legitimate reason for non-payment.

Allegations of construction defects, including shoddy workmanship, tend to trigger construction lien conflicts. The property owner may argue that the contractor and/or subcontractors did not fulfill contractual deliverables, which may include provisions that specify an acceptable level of work. The contractor or subcontractor, in turn, may disagree and argue they did meet all contractual requirements and are therefore owed payment.

There may be cases where payment has not yet been issued for whatever reason, but a recorded construction lien is still not enforceable. This can occur if the lien was not recorded (or foreclosed on) within the applicable timeline or if the property owner did not receive a copy of the lien as required by law. In these instances, a property owner may be able to successfully argue that the lien is not valid.

The simplest way to resolve a construction lien dispute is for the contractor or subcontractor to cancel the lien. They can do so once they are satisfied with the payment they have received. It may be in your best interest to negotiate an acceptable resolution if the conflict hinges on defects.