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How to Avoid the Mechanic’s Lien

by | Jul 20, 2015 | Business Law, Real Estate Law

The Mechanic’s lien is a tool used by subcontractors and suppliers allowing them to have a legal claim against a property for which they were involved in a remodel or other improvement.

For Example: If a property owner needed to complete tenant improvements on a property, they would hire a contractor. The contractor hired a subcontractor to complete the electrical work, but never paid them for their work. The subcontractor could place a lien against the property in order to recover their money.

It’s important for anyone involved in property improvement to understand that the law allows the subcontractors to come after your property (that was improved) if they aren’t paid for the job; even if the property owner pays the contractor in full. If the contractor doesn’t, in turn, pass payment along to the subcontractors on the job, they can place a mechanic’s lien on the property. The property could be responsible for payment of the same work twice; depending upon the size of the project the amount of liquid funding available the property owner could even end up in danger of losing their property.

Avoiding the Mechanic’s Lien:

  1. Joint Checks: Paying with joint checks means that subcontractors and suppliers get paid. These checks are made out jointly to the general contractor and a particular subcontractor/supplier.
  2. Lien Waiver: Have your contractor obtain lien waivers from all subcontractors/suppliers used for the job.
  3. Pay Directly: You can make payment for work directly to the subcontractors/suppliers and subtract these payments from the contractor’s payment.

It’s not out of line to be wary of mechanic’s liens. Keep receipts and paperwork received from contractors, subcontractors and suppliers; especially notices of services/goods rendered. It could also be useful to follow up on notices of goods/services rendered to ascertain whether or not subcontractors and suppliers have been paid for their work on the project. If they haven’t, you should consider requesting waivers from them at your next meeting with the general contractor on the job.

For assistance avoiding mechanic’s liens get in touch with the experienced California real estate and business attorneys at The Law Office of the Law Office of Ernesto Aldover.