Lien Rights Explained, Part I: What is a Mechanic’s Lien?
We’ve referenced the issue of lien rights on here before. Lien on Me
In the construction industry, lien rights are one of the key tools to ensuring payment for work completed. However, looking back through our old blog posts, I realized that we’ve left a few crucial details out: Namely, what are lien rights? What do you have to do to protect those lien rights? How do you file a lien?
Just knowing that lien rights are a thing doesn’t really help anybody.
After all, I know that private jets are thing, but I sure as heck don’t have one.
And so, in the interest of making this blog a tad more educational, I think it’s high time we dive right into the key question of “What are liens?”.
Specifically, when we talk about lien rights, what we are really referring to is a mechanic’s lien.
According the world’s most reliable source (Wikipedia), a mechanic’s lien is ‘a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property’.
In short, if you do the work, and the owner or GC doesn’t pay you, you can gain a security interest in the property. If need be, this can even result in the court ordering the property sold so that you get paid from the proceeds.
Liens are a big deal. However, in order to be able to exercise these rights, you have to do more than just perform the work. You have to monitor the lien laws for your state, check to ensure that the work you do falls within your state’s statute, send the appropriate notices, and ensure that no deadlines pass. Without all of these steps, your lien rights will quickly disappear, depriving you of one of the construction industry’s most powerful tools for ensuring payment.
Tune in (or, perhaps more accurately, read in) next week for a basic overview of the notices required by most states in order to preserve lien rights.