When contractors and subcontractors have not been paid for their services, they may legally place a Mechanic’s Lien on the property they have worked on. Perfecting those liens helps ensure that they are properly executed to provide payment for their work and the materials they have provided for real estate improvements or repairs.
What Does a Mechanic’s Lien Accomplish?
Once a Mechanic’s Lien has been placed on a property, the owner cannot transfer ownership of it without first paying the contractor/subcontractor lienholder. The lienholder could also choose to foreclose on the property and force it to be sold to satisfy the lien. However, to ensure that a Mechanic’s Lien works as it should, it needs to be “perfected.”
How to Perfect a Mechanic’s Lien
Perfecting a Mechanic’s Lien prevents the lienholder from losing his or her lien rights. It is a series of steps that must be done according to strict guidelines.
Recording the Lien Claim
The contractor or subcontractor must file their lien claim within four months of completing their work with the recorder of deeds office. The claim must include:
- Type of work performed
- Date of completion
- Balance due to the contractor
- Property description and PIN
- Names of owners, who hired the contractor and mortgagees on the property record
If the owner occupies the residence, the lien must be served by the contractor to the owner within 10 days of the recording.
File Suit to Foreclose
The contractor or subcontractor must file suit to begin foreclosure on the lien within two years of the last day work was performed. If a suit is not filed, the contractor will lose his or her lien rights.
Provide Additional Notices
Subcontractors are also required to provide additional notices of their claims to preserve their lien rights. A notice must be delivered to the owner within 90 days of the last day of work that reiterates the information stated in the recorded lien claim. When the owner occupies the residence, the subcontractor must also provide a notice to the owner within 60 days of the first-day work was performed. This notice serves as notice that if the subcontractor is not paid for his or her services, a Mechanic’s Lien might be filed. This notice also recommends requesting a lien waiver from the contractor when the bill for the home improvements is paid. The intent of doing so could protect the homeowner in the event the contractor fails to pay the subcontractor.