How Mechanic Liens Work And Get You Paid


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When unpaid on a construction project, suppliers, subcontractors, laborers, and others have the right to file a mechanics lien claim. This protection is built into the very foundation of America's construction industry, having been first invented by founding fathers Thomas Jefferson and James Madison! Today, nearly everyone in the construction industry knows that they have lien rights...but sometimes may not know exactly how these lien claims work, and why they ultimately result in getting a company paid.

This presentation, viewed or downloaded by over 100,000 construction industry, legal, and financial professionals, breaks down the effects of a mechanics lien claim, and helps you understand how these claims actually work. In other words, what will change with the filing of lien claim that will result in getting you paid. Some of the following effects are explored:

- Impacting the underlying property
- Getting the attention of developers and construction lenders
- Causing contractual breaches and problems for key parties
- Increasing negotiation leverage
- Helping in the event of a bankruptcy filing

Based on a popular zlien article titled: "17 Ways A Mechanics Lien Works To Get You Paid," this presentation explains the consequences of a mechanics lien, what it means to the construction project, and why these instruments can help you get paid.

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How Mechanic Liens Work And Get You Paid

  2. 2. 1A Mechanic’s Lien Will Encumber The Property. Lien document is recorded with land records and will appear on a title search of the property. As a practical matter, this means the property will not be sold, refinanced or otherwise transferred without the lien claim being resolved.
  3. 3. 2A Mechanic’s Lien Gets The Lender’s Attention. Many construction projects have a lender giving money to the property owner or developer. When you file a lien you jeopardize their security in the property, and so they make movements to get your lien claim resolved.
  4. 4. 3A Mechanic’s Lien Gets The Owner’s Attention. The first two reasons already discussed, in addition to other reasons, result in the property owner or developer being concerned about your lien claim. If they didn’t know about your debt before, they will know about it after the lien is filed, and they will be interested in resolving it.
  5. 5. 4A Mechanic’s Lien Creates Contractual Breaches. When a mechanics lien is filed against a construction project, contractual provisions in various contracts obligating parties to keep the property free of liens are put into breach, which provides the lien claimant with leverage to demand payment.
  6. 6. 5A Mechanic’s Lien Makes More Parties Obligated To You. While you are normally limited to demand payment from the party who hired you only, filing a mechanics lien obligates the property owner to your debt and potentially the general contractor (and a surety) as well. This opens up more pockets, and increases your chances to get paid.
  7. 7. 6A Mechanic’s Lien Sets A Firm Deadline. Maybe you will get paid on the construction project, but you’re just not getting paid right now. Filing a mechanics lien helps set a firm deadline for the resolution of your claim. Deadlines get folks moving.
  8. 8. 7A Mechanic’s Lien Gives You A Security Back-Up Plan What if everyone is out of money - your customer, the prime contractor, the developer...everyone? This sometimes happens, especially in a bad economy. Filing a mechanics lien gives you a secure backup plan, as you can always fall back on the property’s equity if unpaid.
  9. 9. 8A Mechanic’s Lien Makes You A Priority To Debtors Filing a mechanics lien means that folks will sometimes pay you and your claim just to get rid of the nuisance. Take - for instance - a developer or prime contractor that challenges your workmanship. They may play hardball with payment before a lien, but after a mechanics lien is filed it may be worth it to just pay your claim.
  10. 10. 9A Mechanic’s Lien Sticks And Is Hard To Challenge Even when a party wants to dispute your mechanics lien claim it is difficult for them to do it. A mechanics lien claim will tie up the property and the only way to get it removed is to prove that it was filed frivolously - a very high standard. As a result, your lien claim sticks and pushes the parties to resolve it.
  11. 11. 10A Mechanic’s Lien Help When Parties File Bankruptcy Bankruptcy may get debtors out of ordinary debts, but when you file a mechanics lien you elevate your debt to a secured debt. In addition to providing leverage with the bankrupt party, don’t forget you can still go after the property, the property owner and other non-bankrupt parties.
  12. 12. 11A Mechanic’s Lien Will Freeze Money On The Project Bankruptcy may get debtors out of ordinary debts, but when you file a mechanics lien you elevate your debt to a secured debt. In addition to providing leverage with the bankrupt party, don’t forget you can still go after the property, the property owner and other non-bankrupt parties.
  13. 13. 12A Mechanic’s Lien May Force Joint Check Agreements Sometimes parties are having financial trouble on a project and no one knows about it...until a mechanics lien is filed. Mechanics liens expose financial difficulties being experienced by parties and may force a party into a joint check agreement, which can benefit you and get you paid.
  14. 14. 13A Mechanic’s Lien May Qualify You For Attorney Fees The right to recover attorney fees is a huge benefit in any legal battle. Parties are not entitled to recover attorney fees by default, but a mechanics lien usually qualifies you to recover attorney fees and other costs. This increases your chances of getting the debt paid.
  15. 15. 14A Mechanic’s Lien Escalates Your Situation Sometimes getting the prime contractor, developer or other party to pay your debt requires just a little push. A mechanics lien claim escalates your collection efforts and shows the other parties you mean business, which translates into a faster payment for you.
  16. 16. 15A Mechanic’s Lien May Affect The Prime’s Bonding Ability Bonds are very important to prime contractors. When a project gets liened, the bonding capacity of the prime contractor is jeopardized. This means your mechanics lien claim becomes very important to them, and that means you get paid.
  17. 17. 16A Mechanic’s Lien Affects Various Relationships Typically the prime contractor has a good relationship with the owner, and the owner with the lender, and so on. Filing a mechanics lien puts stress on these relationships and pushes the parties to resolve the claim. !
  18. 18. 17A Mechanic’s Lien Creates Leverage In Your Favor. Let’s get down to the big point here. All of these “ways” a mechanics lien works boils down to this one: A mechanics lien creates leverage. It creates lots of leverage, and the leverage can come in many forms. Regardless of form, however, the result is the same: payment.