Liens are often a source of confusion (and dispute) in the construction industry. In general terms, a lien is an encumbrance on a property incurred for a debt. However, there are many kinds of liens, from assessment liens imposed on property owners by municipalities to voluntary liens established by contract with a debtor.
Two types of liens are frequently the source of dispute in construction litigation: judgment liens and mechanic’s liens.
A mechanic’s lien is a vehicle typically used by subcontractors and suppliers as a preemptive measure to make sure they get paid for their goods and services in the course of new construction or a remodeling project. If a general contractor is overseeing the work, the responsibility for such payments rests with the GC. If the GC fails in that regard, a mechanic’s lien allows subcontractors or suppliers to seek recovery directly from the property owner. There are detailed requirements for filing and foreclosing on these liens.
The judgment lien differs from the mechanic’s lien in that it is typically sought after the work is done. From a contractor/supplier perspective, the advantage is that such a lien is backed by a court’s order. It also can be applied against any of the targeted individual’s property that might be within the county in which the lien is filed.
When a dispute arises regarding either type of lien, effective resolution depends on in-depth knowledge of the law as well as a thorough understanding of the construction industry. To ensure that all details are properly covered, experienced legal counsel should always be consulted.