Filing a mechanics lien is the most powerful tool a contractor, subcontractor, or supplier can use to get paid. One of the ways a mechanics lien can be used to get paid is by causing a breach of contract. Although this sounds like a negative result, it puts pressure on parties to get the lien taken care of, as discussed below. This is part of a 17-Part Series on How Mechanic Liens Work To Get You Paid.
Lien and Breach
On construction projects, there are generally many contracts between a wide variety of parties. Owners will have contracts with prime contractors, prime contractors with subcontractors, subcontractors with suppliers, owners with tenants, etc. More likely than not every single one of these contracts will have a provision obligating a party to keep the property free and clear of all liens. When you file a mechanics lien, this immediately raises the issue of breach of contract and puts pressure on the breaching party to take action to remedy the situation.
Since parties don’t want to have their own contracts cancelled, lose work, or get in a contract dispute over somebody else’s lien – the lien works to provide pressure and leverage to get the claimant paid. Clearing the property from encumbrances may be a necessary procedure to get additional payment from the owner, and as such, gives the lien claimant a hand-up in any dispute over outstanding payment.
Further, the fact that a mechanics lien can put an upper-tiered party in breach of their underlying contract brings visibility to the lower-tiered party not getting paid. The squeaky wheel gets the grease, and it is a foregone conclusion that a party who creates a breach on contract (or potential breach of contract) situation will be noticed.
Other Ways A Mechanics Lien Works To Get You Paid
A mechanics lien claim may cause the pressure of a breach of contract, and that’s an important feature of these documents. Nevertheless, it is not the only feature, and there is an assembly of other effects that flow from a mechanics lien filing; all of which will improve your chances of getting paid. We’ve put together a Free Guide to the 17 Ways A Mechanics Lien Works To Get You Paid. The full list of these mechanics lien effects are as follows:
- A mechanics lien encumbers the property
- A mechanics lien gets the lenders attention
- A mechanics lien gets the owners attention
- When mechanics liens are filed they cause contracts to get breached
- More parties become obligated to your debt
- A mechanics lien sets a firm deadline
- You can always fall back on the property for payment if you filed a mechanics lien
- People will pay you to avoid dealing with the mechanics lien
- Mechanics liens are hard to challenge
- Mechanics lien claims help when parties file for bankruptcy protection
- Mechanics lien will effectively freeze money flow on a project
- Mechanics lien claims may force parties into favorable joint check agreements
- Lien claims may entitle you to attorney fees and other costs
- Mechanic liens escalate the situation and prioritize your debt
- Mechanics lien claims may affect a contractor’s bonding ability
- Lien claims affect relationships
- Mechanics liens creative leverage