Tuesday, December 26, 2006

Mechanic's Liens and the Homeowner

When a contractor files a lien on a property, the first thing the homeowner frequently does is panic. This is generally because the contractor is now telling the whole world that the homeowner owes him money, and the homeowner is most likely embarrassed and humiliated. The reality, however, is usually not that bad.

What does a lien do? A lien, in practice, will only affect the homeowner if he or she is trying to refinance, convey the property, borrow money or switch from temporary to permanent financing. If the homeowner has no intention of doing these things in the near future, then the lien can just stay there until the matter is resolved.

If the homeowner is trying to do any of the above, then he has a couple of choices. By statute, the homeowner can post a bond to satisfy the amount of the lien, and then the lien can be dissolved. The bond does cost money, but it is perhaps the most straightforward way of getting rid of the lien.

Another option is to call the contractor and negotiate. If the homeowner believes that the lien was placed on the property unfairly, she may be able to work out a deal with the contractor that will settle the matter. Getting involved in protracted litigation is usually not the best choice unless the homeowner is advised that he has such a strong case that he will probably win, and hopefully be able to get attorney's fees back.

There are many instances in which the lien is not good, or "perfected." The homeowner should seek the advice of an attorney to find out his rights in that situation. In addition, in Massachusetts, although subcontractors have the right to place liens, they do not have the right to collect directly from the homeowner if their contract is with the general contractor.

Liens can be scary, but they simply provide the contractor with a security interest in one's property. The underlying dispute needs to be resolved before one's collateral is actually threatened. The best thing for the homeowner to do is to handle disputes before contractors actually place liens. In addition, when a project is finished, they should request lien waivers from the contractors.

As with most disagreements in construction jobs, a good contract, written change orders and good communication help to prevent the placement of a mechanic's lien on one's property.

33 Comments:

At 12:24 PM, Anonymous Anonymous said...

Is there any case law or statute mention that backs up the statement: "In addition, in Massachusetts, although subcontractors have the right to place liens, they do not have the right to collect directly from the homeowner if their contract is with the general contractor."?

 
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