Tips for homeowners to avoid a mechanic’s lien

by | Mar 2, 2018 | Real Estate

The name “mechanic’s lien” can be misleading. Many people mistakenly believe that mechanic’s liens have something to do with the mechanic who has done repair work on their home. Mechanic’s liens actually refer to a legal claim that is usually made by subcontractors and suppliers who have worked on your property. If these subcontractors and suppliers are not paid in full by the general contractor that you hired, they have the option of placing a mechanic’s lien against your house.

This lien will remain until you have repaid the debt in full. What’s more, a mechanic’s lien can be placed against your home even if you have paid the contractor in full: If the contractor does not completely pay its subcontractors or suppliers, they can still place a lien against you. As you can see, it is in homeowners’ best interests to understand how to avoid mechanic’s liens in the first place.

1. The first option for avoiding a mechanic’s lien is to pay your contractor with a series of joint checks. Make these checks out jointly to your contractor as well as the subcontractor or supplier. When a check is made out jointly, it can only be cashed if the beneficiary endorses it, which means a better chance that the subcontractor and supplier get paid on time, in full.

2. It is also possible to prevent mechanic’s liens by asking your contractor to get lien waivers from subcontractors and suppliers. This is not always an easy option. But many jurisdictions require contractors to provide waivers for their work before they can accept more payments from you. The waivers can prevent subcontractors and suppliers from taking out mechanic’s liens against you for the contractor’s failure to pay them.

3. The last option for avoiding a mechanic’s lien is probably the least preferable. In some cases, it may be possible to pay the subcontractors or suppliers yourself. Then, you would deduct these payments from the amount you owe your contractor. There is one major risk to this, however: Some subcontractors or suppliers may consider you responsible for withholding income taxes and Social Security from their payments.