Whatever reason you may have for not paying a contractor, know that they may be able to place a lien on your property.
A lien is the legal right, granted to a creditor who’s owed a debt, to have security against a property until the debt is paid.
A mechanic’s lien, also known as construction lien or property lien, is typically filed by a contractor, subcontractor, or supplier against a property owner for failure to pay in part or in full for work performed and/or materials furnished.
A typical example of the type of case we encounter in our Real Estate Litigation Practice is when a property owner hires a contractor to perform work on their property, like building a backyard patio or converting the garage into a living space (which you need a permit for), and then refuses to pay the contractor.
Usually there’s a reason; a disagreement over the agreed upon payment, or added charges, or dissatisfaction with the work or materials.
If an agreement isn’t reached, the contractor can sue for breach of contract, but they can also file a mechanic's lien on the property.
The lien would not be against the total value of the property, but against the value of the work and/or materials supplied and not paid for.
It must be filed within 4 months for a single-family home or 8 months for any other property, from the completion of the contract, performance of work, or furnishing of materials. It can be tricky to file, and an improperly or untimely filed lien may be dismissed by the court.
A mechanic's lien creates a cloud on the property title and appears in public records, which would make it virtually impossible for a property owner to refinance or sell it.
What’s more, if not addressed the debt can accrue interest of up to 9%.
Disagreements with contractors are not uncommon. But unless the lien is satisfied it can prove a real nuisance, and in an extreme case might even cost you your home or other property.
Thomas Weiss is counsel in VMM’s Commercial Litigation, Real Estate Law, and Matrimonial & Family Law Practices. He can be reached at firstname.lastname@example.org and 516.437.4385 x146.