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Homeowner's Guide Residential Construction Liens and Bond Claims

Homeowner's Guide Residential Construction Liens

Mechanics Liens

Understanding a Mechanics Lien

A person providing labor, materials, or equipment to a residential construction project has the right place a lien on the property.  

Think of a mechanics lien like your home mortgage held by the bank on your home. However, unlike a mortgage interest which you provided to the bank when you closed on your home, a mechanics lien is an interest that is obtained on your home without your consent.

If properly placed, the mechanics lien essentially turns your home into collateral up to any unpaid earnings, attorney fees, and costs. Just like your mortgage, a mechanics lien can be used to foreclose on your house if you don't pay the underlying obligation.

Therefore, the filing of a mechanics lien on a person's home can be a very unsettling and stressful experience.

This is especially true if you are dissatisfied with the work of a residential construction contractor, and you have withheld payment as a result dissatisfaction.

How does a Homeowner Fight a Mechanics' Lien?

By statute, there is an expedited procedure (called a show cause hearing) that will allow the homeowner to seek release or reduction of a mechanics lien. There are several arguments you can make to resist foreclose of a mechanics lien:

  • Lack of Advance Warning: A general contractor hired by the homeowner does not have to provide a Notice to Owner to have lien rights. However, in residential remodels of homes less than four units, a general contractor must provide a statutory Notice to Customer. The document requires advance notification of lien rights. Failure to provide a required Notice to Customer will prohibit the general contractor from recording a mechanics lien.      
  • Incorrectly Filed: The mechanics lien must be filed within the applicable recording office in the county where home is located. If it is not filed in the appropriate office, it will not be effective.
  • Inadequate Content: To be effective, a residential contractor's mechanics lien must include your name and contact; the homeowner's name; a description of the property; the date work commenced; the date the residential contractor left the job; the principal amount claimed by residential contractor; and whether the claimant is asserting a lien based on an assignment. A mechanics lien must also be signed, notarized, and include a sworn statement that the residential contractor (or its authorized representative) believe that the notice of claim of lien is true and correct.
  • Filed Too Late: A mechanics lien must be filed within 90 days of the residential contractor being off the job. Once filed, a residential contractors' mechanics lien only lasts for eight months unless the residential contractor commences a lawsuit in the superior court of county where your home is located to foreclose on the mechanics lien.  
  • Excessive or Frivolous: The mechanics lien statute only allows a lien for labor, professional services, materials, or equipment. Mechanics liens which include interest, late fees, attorney fees, collection fees, or other costs are excessive. A homeowner who successfully shows a judge that a mechanics lien is excessive is entitled to an award of attorney fees and costs for showing that the mechanics lien is excessive or frivolous.
  • Prove that the Residential Contractor Breached the Residential Construction Contract: A homeowner can always defend the foreclosure of the residential contractor's mechanics lien by successfully showing that the residential contractor failed to perform the work as promised. This can be accomplished at a formal trial where a judge or jury will decide whether the residential contractor failed to fulfill its obligations. A homeowner may defend on the basis that the residential contractor's failing deprived them of the benefit of a construction contract (called a material breach) or may show that it was necessary to hire another contractor or to expend additional costs to re-do or complete the work. If the outcome of the trial is favorable to the homeowner, the judge will issue a decree releasing the lien which can be recorded with the applicable county real estate office under your home's parcel or Tax ID number to release the lien.       

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BAROKAS MARTIN & TOMLINSON

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