We received an Intent to File Claim of Lien. I don't understand how this is possible. The contractor was hired by our Contractor. We have no contact with the contractor that has not been paid. It is between those two parties.
1 reply
Oct 1, 2019
Mechanics lien law can be confusing even for parties who deal with it all the time as part of their business processes. For property owners or others who don't spend a lot of time dealing with construction payment and the associated remedies it can be even more confusing and frustrating.
Mechanics liens provide a claimant an interest in the property actually being improved. Provided certain requirements are met, a mechanics lien can be claimed by nearly any party who provides labor or material to a construction project. Mechanics liens were created in order to provide payment protection to parties who work on construction projects, no matter who they contract with. This means that one of the most powerful aspects of mechanics liens is that a mechanics lien obligates the owner (through their property) - even when the owner does not have a contract with the lien claimant.
In some states, mechanics liens are only allowed to the extent that there is still money owed by the property owner to the direct contractor. These states are "unpaid balance" lien states. Other states, however, like Wisconsin, are "full price" lien states. In a full-price lien state mechanics liens are allowed to the full extent a party remains unpaid, and a property owner may be forced to pay twice for the same work (once to the GC and once to the unpaid subcontractor or supplier directly).
In full price lien states, the state has made the determination that the property owner is the party best able to control the flow of funds to the project, and the public interest of ensuring payment to parties who perform construction work outweighs the interest of making sure owners are not obligated to pay twice. In the event that a lien is claimed and a property owner must pay, the property owner would have an action against the GC to recover that amount. And, if a mechanics lien is claimed and an action to enforce the lien is initiated, the non-paying contractor would be a necessary party to the enforcement suit.
Since a notice of intent to file a lien has been received, but no lien has yet been filed, there is an opportunity to open channels of communication and avoid the lien filing. Now that a payment issue has been identified, a discussion can occur between all interested parties (you, the contractor, and the parties the contractor hasn't paid) to figure out the specific problem and the reasons for it. Talking it out, and letting the GC know that the potential liens must be resolved, and figuring out how that will happen, can help avoid the liens being actually filed.