A MECHANIC’S LIEN is a legal claim that contractors, subcontractors, or suppliers could place on the project property to secure payment for work or materials provided in a construction project. It serves as a powerful tool to ensure payment.
In some cases, the contractor could opt to file a mechanic’s lien if a property owner fails to pay a big portion of the amount due for the work performed. A subcontractor and material supplier could likewise opt to file a mechanic’s lien if a general contractor fails to make proper payment for their work and materials.
For example, a contractor hires a subcontractor to deliver and pour concrete to finish a portion of a construction project. The subcontractor has an agreement with the contractor but not with the property/project owner. The subcontractor could file a mechanic’s lien if the contractor fails to pay for the concrete they provided for the project. The lien would be against the project property, annotated on its title, and would remain active until payments are made. Only then will the lien be cancelled.
PRACTICAL TIPS on how you as project Owner can safeguard yourself from this powerful tool that could possibly be used against you:
Ask the General Contractor to secure a progressive Certificate of Payment or Updated Statement of Account from all major suppliers and subcontractors and making the release of progress payments contingent upon the submission of those documents.
Secure and file copies of the signed weekly Payroll Sheets
Incorporate into the contract a provision requiring the general contractor to submit signed WAIVER OF LIEN from all subcontractors and suppliers.
Refrain from signing on behalf of the General Contractor for materials delivered to the jobsite. REMEMBER, always seek legal and expert advice when dealing with the process, documentation, and intricacies of these matters.
