Protecting Real Property From Burdens Imposed By A Mechanic's Lien
Often a mechanic’s lien is discovered long after it's been filed in the public records, but by taking a few proactive measures, property owners can ensure their properties are protected from the burdens imposed by such mechanic’s liens.
Notice of Commencement: File a Notice of Commencement before beginning any home construction or remodeling project. Record the form with the Clerk of the Circuit Court in the county where the property being improved is located. Post a certified copy at the job site, too. The Notice notes the property owner’s intent to begin improvements, the location of the property, description of the work and the amount of bond (if any). It also identifies the property owner, contractor, surety, lender and other pertinent information.
A property owner who fails to record a Notice of Commencement or incorrect information on the Notice could result in having to pay twice for the same work or materials. Request a list of all subcontractors and suppliers who have a contract with the contractor to provide services or materials to the property.
Releases of Lien: Prior to making any payment, the property owner should receive a Release of Lien from every supplier, contractor and subcontractor, which covers the materials used and the work performed on the project. The Release of Lien is a written statement that removes the property from the threat of lien. If the contract requires partial payments be made before the work is completed in full, then get a Partial Release of Lien covering all workers and materials used up to that point in time.
Before final payment, obtain an affidavit from the contractor that specifies all unpaid parties who performed labor or services, or provided materials to the property. Make sure the contractor obtains releases from all of these parties before making final payment.
Notice of Termination of Notice of Commencement: At the end of the project and after the contractor is paid in full and obtained all of the necessary Releases of Lien and affidavits as described above are obtained, file a Notice of Termination of Notice of Commencement with the Clerk of the Circuit Court in the county where the property being improved is located.
Once a Lien has been Filed: States typically have a process by which the land owner may challenge the claimant's prima facie entitlement to the liens on grounds such as proper identification of the property, compliance with notice requirements, and timing. If the lien claim survives those challenges, the owner may "bond off" the lien by filing a surety bond with the court in which the lien action has been intiated. This, in effect, frees the property from the lien and allows for sale of the property. The ability to bond off the lien is especially crucial where developers desire to proceed with the sale of newly built homes, which would otherwise remain unsold and unoccupied during the lien litigation process.
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