Mechanic's Liens: What You Need to Know
A mechanic's lien is a type of lien, or legal claim over a property, that allows contractors and subcontractors to potentially foreclose on your property in order to satisfy their debts. Mechanic's liens from previous owners are one of the many potential title issues that can be detected during the title search process.
Subcontractors Can Also File Mechanic's Liens
Even if the past owner of the property properly paid their general contractor for all services rendered, if the general contractor did not pay the subcontractors, the subcontractors themselves can place a mechanic's lien on the property. Unfortunately, if a subcontractor files a mechanic's lien against a property that has already closed (and now has a new owner), that new owner could be responsible for footing the bill-- especially if the general contractor involved is insolvent or has gone out of business.
Who Else Can File a Mechanic's Lien?
It's not just general contractors and subcontractors that can file a mechanic's lien-- in addition, plumbers, electricians, HVAC contractors, and laborers can file one as well. And, while significantly less common, an unpaid architect or civil engineer can also file a claim for unpaid work. The time limit during which an eligible party can file a mechanic's lien on a property varies from state to state, so you may also want to check with your title company about this.
A Mechanic's Lien Endorsement Can Help You Stay Protected
While most standard title insurance policies do not cover mechanic's liens, you can easily purchase a policy endorsement that covers them. Since mechanic's liens can often seemingly appear from nowhere, it's often better to be safe than sorry-- especially if a lot of work has recently been done on the property that you want to buy.