Understanding How Mechanic’s Liens Affect Real Estate

 Posted on February 26,2021 in DuPage County Real Estate Attorney

Commercial and residential real estate matters can be complicated since they often involve a lot of paperwork and legal terminology. However, it is important to understand all of the terms to avoid losing time or money. One such real estate issue many people may not be familiar with is a mechanic’s lien, which is a legal document that is filed against a house or other similar type of property. Mechanic’s liens are a means by which subcontractors and suppliers can seek payment for upgrades or enhancements that were performed on a property if they are not getting paid per the terms of their contracts.

Making Home Improvements

Homeowners can face a mechanic’s lien even if they do not miss repair or home improvement payments. For instance, if you have your kitchen remodeled and the contractor does not pay the material supplier, that individual or company can put a lien against your house as a way of recovering the money they are owed. You are then responsible for paying any subcontractors, suppliers, or workers for their labor (time) and materials.

Many homeowners do not know that even if they already paid a contractor for work, if the other parties or tradesmen involved in the project are not paid by the main contractor, the subcontractors can come after the property on which the work was performed, such as a house. Ultimately, if you own a home, you may be required to pay for the work a second time, or worst-case scenario, you may have to sell your house if you cannot afford these extra costs.

Avoiding a Lien Against Your Property

Having liens placed on your home can prevent you from obtaining a bank loan or even selling your property in the future. If you currently have a mechanic’s lien on your property, or you are scheduled to have repairs done, it is essential that you seek professional legal advice. An experienced real estate and construction law attorney will alleviate your concerns and protect your interests. Here are a few ways that you may be able to avoid a mechanic’s lien:

1. Pay with checks made out to both the contractor and supplier. To ensure timely payment of contractors and suppliers, you can write a series of checks, made out jointly to the general contractor and the specific subcontractor or supplier. The beneficiaries must endorse the checks before they can be cashed.
2. Obtain a lien waiver. If the contractor includes a provision in the construction contract, such as a lien waiver, this will relieve the owner of the property of having to pay the parties mentioned in the contract. In many situations, a contractor must provide a waiver for all work for which the contractor has been paid before accepting any further payments from the owner.
3. Pay contractors and suppliers yourself. Although not the most ideal option, you can directly pay the subcontractors and suppliers and then subtract those payments from the amount the general contractor receives. However, this can make you appear to be the employer to the subcontractor or supplier, thus making you responsible for withholding income for state and federal taxes and Social Security.

Contact a DuPage County Real Estate Attorney

Commercial and residential real estate can involve many different issues, including mechanic’s liens. If you have questions or concerns regarding how this legal document may impact your property, it is important to seek legal counsel. The experienced team of Stock, Carlson & Duff, LLC will assist you with all of your real estate needs. Our knowledgeable Wheaton, IL real estate lawyers will help you identify your best option for moving forward. To set up a private consultation, call us today at 630-665-2500.

Sources:

https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=005500050K3-5010.8

https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2254&ChapterID=63