OPERATIONS
MECHANIC’S LIENS
Understanding Mechanic’s Liens UNDERSTANDING HOW LIEN RIGHTS WORK AND HOW TO ACCURATELY TRACK LIEN DOCUMENTATION IS ESSENTIAL FOR DEVELOPERS.
By David Jacobs
ost real estate developers and investors have at least a basic understanding of what a mechanic’s lien is and that contractor’s lien rights can pose a financial risk to a project, if not properly managed. Whether you have a contractor remodel your guest bathroom or hire a firm to develop a new multifamily complex, the mechanic’s lien and the associated rights, rules, and regulations hold sway over the financial status of your project. Understanding how these lien rights work and how to accurately track lien documentation during the construction process is essential M
for any developer. Developers are aided in this process by construction lenders and other third-party servicers, but it is always beneficial for a developer to maintain an un- derstanding of the process as well. WHAT IS A MECHANIC’S LIEN? A mechanic’s lien is a legal tool that guarantees tradesmen will be paid for completed work by granting them an interest in the value of the property. Although original mechanic’s lien legislation likely drew inspiration from similar European civil laws,
the modern form and complexity of the mechanic’s lien are a uniquely American creation. Mechanic’s lien laws are regulated at the state level, and each state has its own set of rules and regulations governing the mechanism of lien rights. Generally speaking, each state will have rules regarding who has lien rights, what notices must be submitted, forms required for lien releases, and deadlines for officially filing a lien against a property. Typically, lien rights are assigned to any contractors, subcontractors,
suppliers, equipment renters, laborers, or other tradesmen
58 | think realty magazine :: november – december 2023
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