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What is a mechanic's lien?

A mechanic's lien doesn't have anything to do with car repair, even if it sounds like it. What it generally refers to in the context of real estate is the work that a contractor does on contract relating to a property, and the amount of money that the property owner has agreed to pay the contractor.

Let's say a bricklaying company does $20,000 worth of work on a property, but the owner of the property decides that he or she doesn't want to pay for the bricklaying services. Or, maybe the property owner is simply out of cash and unable to pay. The refusal to pay could be viewed as a violation of the contract, and a court could approve of the contractor's request to put a mechanic's lien on the property.

The mechanic's lien means that if the property owner sells the property, before the property owner can get paid, the money must be paid to the contractor for the amount that is owed. In addition, an unpaid mechanic's lien could result in the forced liquidation of the property, so that the contractor can then get paid from the liquidated proceeds.

Just because a contractor claims that he or she wasn't paid, however, does not necessarily mean that the contractor can get approval for a mechanic's lien. There is a lot of back and forth litigation in the construction and real estate industries regarding mechanic's liens. If you are a property owner who could be at risk of having a mechanic's lien on your home -- or if you're an unpaid contractor -- be sure to understand the law as it applies to this important aspect of real estate construction litigation.

Source: The Balance, "Learn When and How to File a Mechanics' Lien," Juan Rodriguez, accessed Jan. 19, 2018

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