Mechanic’s liens exist for a good reason: to secure payments for suppliers and subcontractors that work for a construction project. Despite the lien´s lawful objective, this legal claim can give property owners a headache. It can be especially stressful when the owners paid for the subcontractor/supplier´s services, but the contractor failed to transfer the money to them, making the owner look guilty of not paying.
No one likes to pay for services twice, or worse, lose their property because of someone else´s fault. To avoid these consequences —and a mechanic’s lien altogether— here are five different things you can do:
1. Choose a contractor carefully
Hiring a contractor should not be taken lightly, as they will be the ones who will manage your project. You should first check if your candidate has a license and then go to your local courthouse to verify that they don´t have any lawsuits against them. Both actions will guarantee that your future contractor has a good reputation.
2. Consider Joint checks
Property owners in construction commonly use joint checks because it ensures that both the suppliers and subcontractors will receive their payment at the same time as the general contractor. Neither of these parties can cash out these checks unless all of them sign and approve the payment.
3. Notice of Completion
Mechanic’s liens have a specific timeframe in which the subcontractors/suppliers can file them. In New York, the parties must file the notice of lien within 90 days after the date when the payment was due. A notice of completion can reduce the stated timeframe from 90 to 30 days, thus making it harder for the parties to file a mechanic’s lien against the owner.
4. Lien Waiver
The project owner has the right to have the contractor put a lien waiver on the construction contract to be exempt from paying everyone who the contractor is responsible for paying. It is basically like a payment receipt, and it prevents the parties from issuing a mechanic’s lien against the owner of the project.
5. Direct payments to subcontractors/suppliers
The last resource is for the owner to pay the subcontractors and suppliers directly instead of issuing the payment through the contractor. This option sounds easier than it is, as direct payments can make the owner look like they are employing these parties, for which they would have to pay income taxes and Social Security.
Protecting your property
As you already know, the consequences of a mechanic’s lien can be serious. You should hire a contractor you trust and talk to him about the possibility of a mechanic’s lien to secure your interests. Also, make sure that your contract includes a payment schedule that states when the phases of the work start and end to avoid misunderstandings.