Standard disclaimer: I am not a lawyer, so in your circumstance some some details of this whole process may vary depending on where you live and what quirky laws are imposed on you. But, this information is what I have learned from working years as carpenter and running a remodeling company.
If you have ever had a mechanics lien filed against your home, you know first hand what an emotional and financial nightmare it is. Knowing the fundamentals of the law can protect yourself and your property.
A lien is not the same thing as an eviction notice, but it can mean your property can be sold to pay your bills, or it can prevent you from selling you property until you settle your financial obligations are satisfied. Not a happy situation.
What is a Mechanics Lien?
No, it’s not about that guy down at the garage. A lien is a legal method of financially protecting anyone involved with constructing, remodeling, or working on a property. It makes sure that these individuals will be paid on a timely basis for any work done and any building materials furnished.
So who can file one against you, being the homeowner? The general contractor of course, but also the carpenters, plumbers, masons, etc. that he hires. Not only that, but it also extends to any land surveyors, architects, and engineers involved with the project.
Suppose that your property is filed on, the case moves on to litigation. Further suppose it goes badly for you. In that case your local sheriff has the authority to sell your house and use the and use those funds to pay off the filers.
So What is the Filing Procedure?
All workers naturally have a right to be paid, in an acceptable amount of time (specifically the timetable spelled out in the contract in normal circumstances), for work that has been completed successfully.
Further, it is not simply enough to pay the general contractor; you will still be responsible if he fails to pay for any building materials or subcontractors. This is why it is so critical that you choose a company that has gone through some form of evaluation process. A company like Angie’s List can provide you with this information - Ratings, reviews and sometimes revenge. See what local homeowners say about the service companies they hire. Join now.
So what exactly constitutes a reasonable amount of time? It varies depending on the practices followed where you live, but William Trimble tells us, “Normally, those owed money after 120 days past final invoicing start looking at the time span as beyond reasonable.”
And that’s the point at which a lien may be filed and paperwork will be served on you as the property owner, usually by a Sheriff.
What are the Contractors Legal Responsibilities?
The time frame must be established. The entity filing will go to the county (or I suppose that would be a parish if you happen to live in Louisiana) and file a formal Notice of Completion as soon as the project is completed and the building inspectors have signed off on your building permits ensuring that your municipal building code was complied with.
Suppose that the sum of building funds in dispute is above $500. Then, the contractor has to serve a Twenty Day Preliminary Notice. If he fails to do this particular step, it may result in forfeiting his right to even file a lien.
As the property-owner, your responsibility is to notify the filing contractor if there is any incorrect information on the Notice.
Legal Protection is Available for the Property Owner
As the owner of the property, keep in mind that it is to your advantage to be proactive in your dealings. Following the proper steps here is as critical a concept as following the ones you followed when you signed on with your contractor.
Other than with small jobs, payment for construction work is not paid out at one time in a lump sum. Rather, payment is transacted in what are called “draws”. These are payments made in stages as portions the work are finished. At each draw, ensure that your contractor signs a Conditional Lien Waiver.
Why? Because this will serve to protect you for the sum of funds tendered thus far in the event of any lien down the road. Consider it a payment receipt. CYA, as they say.
As soon as the final draw is transacted following completion of the job, ensure that your contractor signs an Unconditional Lien Waiver. However, assume that your general contractor hasn’t paid off his sub-contractors, or the hardware store, or any other suppliers?
In a strict legal sense, you are indeed still responsible for a mechanics lien. To protect yourself, ensure that you don’t release the final check until all parties in the supply chain have been paid by your contractor. Again, proactive CYA.
I know this all seems quite dry, tedious, and detail-infused. But when you consider that your home remodeling investment is involved, the effort is certainly justified. And in closing, always research your local, municipal, or state laws to find out whether your legal stipulations vary from the basic information outlined in this article.
References:
Trimble, William A. Screw It! I’ll Be My OWN Contractor. Scottsdale, Arizona: Maricopa Publishing, 2008.
