Disputes arise all the time in construction projects. It is a reality of the business that, while unfortunate, is constantly present. Mechanics liens, although potentially a precursor to an action in court, can actually help avoid litigation and get you paid. This is part of a 17-Part Series on How Mechanic Liens Work To Get You Paid.
Disputes Are Common
It is all too common for disputes to arise on a construction site. Some of the reasons for these disputes are workmanship or scope of work, timing issues, and more. Construction projects are such complex situations with so many different parties working on top of one another that it seems disputes are almost inevitable. Owners and contractors can issue threats and even withhold payment if they are not please with work performed on the jobsite and/or the materials furnished. The requirements for withholding payment are determined by the state in which the project is located, and can be a serious problem. Of course, if payment is not being withheld appropriately, mechanics liens are a powerful solution.
Fight Fire with Fire
Mechanics lien claims have so many consequences that they produce payment before litigation is necessary.It seems ironic that a construction company may be able to avoid litigation by filing legal documents, but the strategy is effective. Because mechanics liens threaten contractors and/or owners with an expensive legal suit that they are not likely to win, and the mechanics lien encumbers the property itself, the results could be catastrophic for owners and/or contractors. This means that the majority of cases in which payment is actually due end with the lienholder receiving payment far before a foreclosure action must be undertaken.
Lienholders Pack the More Powerful Punch
Mechanics liens can and should be filed when a construction participant faces an improper payment dispute. They create leverage to get parties paid. While a mechanics lien claimant may fear an owner or GC challenging a lien as improper, and threaten to sue the claimant for recording the improper lien, this threat shouldn’t worry a lien claimant who has performed work, not been paid, and followed the proper steps in recording the lien claim. Further, workmanship issues, while potentially considered in what amount may be due to the claimant, are not a factor in any determination of a lien’s validity.
Other Ways A Mechanics Lien Works To Get You Paid
Owners and GCs want to avoid mechanics liens being filed on their property or projects, and that’s an important feature of how these documents can work to get you paid. Nevertheless, it is not the only feature, and there are many 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