Main floor laundry room? Check. Spacious kitchen with plenty of storage? Got it. Spare room outfitted with a custom built gift-wrapping station? Really? Um, yes. Got that too. When it comes to building your own home, anything is possible–as long as you can pay for it, that is.
When making your dream home a reality, your flights of fancy are restricted only by your imagination and your budget. And, exceeding the latter can land you in a heaping pile of trouble, particularly if your dream property is subject to a construction lien.
What is a “Construction Lien?”
A construction lien, often referred to as a “Mechanics’ Lien,” occurs when a contractor, subcontractor, or supplier files a lien on your home as collateral for unpaid work or materials. This lien can force the sale of your home if you fail to pay what is owed.
It is important to note, however, that the laws pertaining to construction liens vary from state to state.
How does One File a Construction Lien?
Since each state has its own laws, it is important to begin by familiarizing yourself with the procedure required in your jurisdiction. A link to each state’s construction lien laws can be found at US Legal.com.
As “Contractor Does Lousy Work, Files Mechanics’ Lien for Nonpayment” states, the typical steps required for filing this sort of lien include serving the homeowner with a preliminary lien notice within a certain number of days of starting work and delivering supplies; ensuring that the details are provided including the amount, scope of services for which payment is due, and homeowner information; filing the lien with the local county court or registrar of deeds; and beginning the lawsuit within a certain number of days of filing the lien.
Why File a Construction Lien?
It takes a vast amount of manpower and materials to build your beautiful new home. Not only must your contractor be paid, but they will also have to fork over a fortune for skilled trades people like an electrician, plumber, carpenter, and more plus remit payment for the supplies used.
Furthermore, as an “Expert Interview with Mark Cobb on Construction Liens” adds, the construction industry is currently working on extremely low profit margins and one unsuccessful project can destroy the business. A construction lien insures that your contractor will not get left with a huge debt.
What should you do if your Property is Subject to a Construction Lien?
The surest way to remove a construction lien is to pay your contractor what is owed to them.
If, however, you feel that the contractor did not live up to their end of the bargain, there are some measures you can take. The most important being contacting an attorney. They will be able to investigate whether or not the lien was filed properly. If it is invalid, you will be able to have it removed through your county courthouse or registrar of deeds.
If it was filed according to procedure, you will need to work out some sort of agreement with the contractor, seek a mediator, or fight it out in court. This last option, however, can become quite costly.
If you have chosen your contractor carefully and ensured that your budget has some breathing room, building your own home can be one of the most exciting experiences you will ever have. And think of all the gifts you will be able to wrap. There’s a good post on CoffeeWriter on what to consider before hiring a contractor.
Have you had experience with a construction lien? What was the outcome? Is there anything you would do differently?