A mechanic’s lien represents a legal action taken against a property owner by a supplier, general contractor, or special contractor to recover compensation owed by a property owner. Although the goal of every party involved with a construction project is to complete the project without having to resort to filing a mechanic’s lien, in some cases, a construction attorney has to step in to ensure all parties fulfill their contractual obligations.
As a property owner, let’s review a few tips to help you avoid the costly and time-consuming process of settling a construction dispute called a mechanic’s lien.
Go Through the Prequalification Process
Before you hire a general contractor, put the company through the prequalification process. Research the past payment patterns of every general contractor on your shortlist, as well as discuss payment options and how a general contractor ensures every subcontractor receives compensation on time and for the correct amount of money.
Require the Collection of Preliminary Notices
Receiving a notice of a mechanic’s lien creates plenty of frustration for a property owner. You can reduce the likelihood of receiving a mechanic’s lien by requiring the general contractor to obtain preliminary notices. This type of preventive action provides you with information that tracks the work done by each subcontractor working on your home improvement project.
Issue Joint Checks
Sometimes, subcontractors working on a home improvement project do not receive proper compensation because a general contractor withheld funds. To prevent a general contractor from shortening one or more subcontractors with the proper compensation, issue joint checks for payment. This tactic ensures all parties get paid. Issuing joint checks is an effective business and commercial law strategy used by property owners.
Submit a Notice of Completion
Several states provide property owners with legal protection against the filing of a mechanic’s lien if the property owners file a Notice of Completion with the state. This notification lets every party that has the right to file a mechanic’s lien know about the completion of a property improvement project. A notice of completion also reduces the amount of time any party has to file a mechanic’s lien.
Follow the Payment Schedule
Making payments to all parties working on your home improvement project is the easiest way to protect yourself from a mechanic’s lien. Paying for work done in a timely manner eliminates the need for a party to pursue any type of legal action. Keep records of each payment to protect yourself against the filing of a mechanic’s lien.