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What is a mechanic’s lien?

On Behalf of | Oct 7, 2022 | Construction Law

Construction is a risky business for everyone involved. Land, labor and materials are expensive, and a lot can go wrong in a construction project. Sometimes, when something goes wrong, the people and businesses that end up paying the price for it are the subcontractors and other businesses involved in the day-to-day work of finishing the project. What can a subcontractor do if they have already finished their work but they have not been paid?

A mechanic’s lien is one way of addressing this problem. However, a mechanic’s lien can also create problems of its own.

Who files a mechanic’s lien?

Under Indiana law, subcontractors and suppliers may file a mechanic’s lien after they have not received payment for the work they did to improve a property. Note that this applies to renovation projects as well as the construction of new buildings.

When a party files a mechanic’s lien, it gains a legal interest in the property. This helps ensure that the subcontractor will be paid. This can be especially important in big projects where the subcontractor has already paid multiple employees or purchased pricey materials for the project. The lien may be the best way to make sure they will be reimbursed for these expenses.

Problems down the road

After reading the above, we can see why mechanic’s liens are important for subcontractors, but they can mean trouble for other people and organizations involved in the construction process.’

Because a subcontractor with a mechanic’s lien has a legal interest in the property, the title to the property is not clear. This can make it harder to sell.

Sometimes, this may seem unfair. Imagine you are buying or selling a property and you find out that it has a mechanic’s lien because a general contractor failed to pay a subcontractor. Why should you be on the hook for that?

The policy idea behind mechanic’s liens is give subcontractors leverage to make sure they can be paid. If you are the buyer or seller of the property in this type of situation, you can file suit against the general contractor to recover your costs in getting rid of the mechanic’s lien.

Legal advice

There are many parties involved in construction and renovation, and nearly all of them can be affected by a mechanic’s lien. If you are dealing with a mechanic’s lien issue, you may benefit from speaking to an attorney with experience in construction and real estate law.