Perhaps you have heard of a Mechanic’s lien when working on a construction project. Depending on the field and type of work, you may know the term as a “construction lien” or “property lien,” as well. But, what are these documents and how do they affect you?
The Basics of Mechanics lien
Mechanics lien are pieces of documentation that reserve the rights of the filer to unpaid compensation. This means that if a hired contractor is refused their pay for a project, they can either sue the hirer or fill out a mechanic lien. By doing so, the person who hired the contractor will carry the title with them and it will appear on public records.
When a person with a mechanics lien filed against them wants to sell a new property, the buyer would have to take the property subject to the lien or the seller, with the lien, would be forced to pay it off. Typically, the seller will pay off the lien before selling another property.
This also becomes an issue for homeowners who are trying to sell their homes. Banks and financial institutions will not provide any financial resources until outstanding lien are paid off in full.