Before You Hire A Contractor For Your House: Understand Liens And Waivers

If you're a homeowner facing the prospect of some remodeling, you need to know a few things about mechanic liens and lien releases in order to protect yourself. Otherwise, you could run into some serious difficulties down the line. Here's what you should know.

What is a mechanic's lien?

A mechanic's lien gets its name because it was once used exclusively by mechanics, who could put one on a car if they weren't paid for their work. It required the owner to pay off the lien before they could get clear title to their car or transfer it to someone else.

Now, mechanic's liens have become a legal vehicle for contractors to use when they aren't paid for their work on someone's house. If one is placed on your property, you can't sell the house without paying off the lien. Banks will usually refuse to loan money to you against your property's equity, as well. 

The problem is that your contractor isn't the only person who can put one on your house. You can find yourself stuck with one if your contractor fails to pay his or her subcontractors for their work. His or her suppliers can also put a lien against your property for any materials used in your house. While you might trust your contractor, if his business goes under, his subcontractors and supplier won't hesitate to put a mechanic's lien on your property in order to recover their losses.

What is a lien release?

A lien release, sometimes called a lien waiver, is the safest way to protect yourself against the possibility of a mechanic's lien on your property. You can ask your contractor to provide you with an unconditional lien release that indemnifies you against any liens on your property by the subcontractors that he or she uses before you make your final payment on the construction.

Another option is to ask for the lien release, signed by the subcontractors, as you remit partial payments to the contractor as work progresses. You can also ask to pay the subcontractors directly for their work, rather than remit payment through your contractor.

What can you do to fight a lien on your property?

If you find out that a lien has been placed on your property by a contractor, subcontractor, or supplier, you need to speak to a real estate attorney. Liens can be invalidated for a number of reasons, including defects in the way that it was written. Liens have to follow certain requirements under the law in order to survive a challenge in court. They can also be invalidated if you provide proof to the court that you paid all the money that is due.

For more information, talk to an attorney --like one from Valentine & Valentine PC-- in your area today.