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A mechanics lien is a debt collection method used in the legal court system for guarantying payment for services either contracted or carried out. This method is usually used as a last resort when a contractor or mechanic fails to obtain payment for services under other means. Depending on the state you live in, mechanics liens can be utilized by any of the following:
• Primary contractors
• Subcontractors
• Suppliers
• Laborers - The use of Mechanics Liens must be within a set time limit to be effective and binding. Usually these liens must be filed within 14 days after a written statement for the cost of services is provided.
- Mechanics liens trace their history from two points. Old English law held that artisans who worked on a property could file claim against the purchaser of their work. American versions of this lien stem from automobile mechanics needing an easily usable method to legally guaranty payment for work performed. As American contractors and building professionals noticed the effectiveness of mechanics liens, the American legal system allowed for the use of the older English version of this method of collection.
- The function of a mechanics lien is basically to ensure payment. Once a lien is placed upon a piece of property of any type, the owner of that property can not legally sell or provide clear title to the property until the lien is paid off thereby settling the debt. This function of a mechanics lien provides a usable alternative to longer and more complex legal methods available to service providers.
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Two types of mechanics liens exist in American law. The first type is one used by the automobile service industry. This type applies to the following services:
• Auto mechanics
• Parts suppliers
• Towing and transport agents
• Storage and impound yards
A lien of this type usually applies to vehicle services and repairs which were not paid for. Mechanics liens for vehicles require the lien holder to take possession of the vehicle at the time the lien is filed. This is similar to a bank repossession. The lien holder will inform the state Department of Motor Vehicles which will then notify all other persons involved.
The second type of mechanics lien is used by the construction and building trade. This type of lien applies to the following:
• Primary contractors
• Sub-contractors
• Vendors
• General Laborers
• Journeymen
Mechanics liens used by contractors are placed on the property which the building or remodeling project took place. This type of lien affects both the building and the land it sits upon also. In certain situations a sheriff's sale will be held to settle the lien. This is similar to a bank foreclosure. - The effects of a mechanics lien can sometimes be delayed, but not completely disposed of. When a lien of this type is placed upon any property the property becomes non-transferable to any other person unless the lien is lifted via payment or judge. mechanics liens can have priority over other types of debts where the property is used as collateral. Inheritances can be halted if a mechanics lien is in place. In bankruptcy law, mechanics liens must be weighed with equal value to other liens and loans before settlement or sale.
- One significant point to the law governing mechanics liens is that no municipal unit or authority is subject to their enforcement making any government entity exempt from this type of lien. Because of this, a surety bond is placed on the project to ensure payment for services rendered within the allowed time limits.
