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ANNOUNCEMENT: We are dedicated to your legal needs and available during this difficult time. In order to do our part to help stop the spread of COVID-19, we are offering virtual consultations for both new and existing clients upon request. Click HERE to contact us and request a consultation by video, telephone or in person.

How mechanic’s liens impact real estate sales

On Behalf of | Sep 30, 2021 | Firm News |

Many have heard or read the term “mechanic’s lien,” but they may not understand what it means until it comes up during a real estate transaction. Generally speaking, a mechanic’s lien is a legal claim against a property for money owed. If the seller wants to sell their property, they will need to address the lien.

Why are they used?

Subcontractors or suppliers will often file liens against the property because the lienor did work on or provided materials used on the property to improve its value. The lien may not even directly involve the owner – often, it is a contractor who did not pay their bill, or there is a dispute over the quality of the work done. However, since the property owner is the one who benefited from the unpaid services, the owner is obligated to clear up the matter.

In the spirit of full disclosure, the owner should let the potential buyer know there is a lien to be addressed. If the owner claims they did not know (which is not likely), the buyer will find out about the lien when they do a title search to confirm ownership of the property.

Getting rid of it

Sellers are usually motivated by the potential sale to get the lien released, but a motivated buyer can also get involved if they sense an opportunity. There are a few options for getting the lien removed:

  • Negotiate: The owner can directly contact the lienor and try to negotiate a fair deal.
  • Pay: With the deal held up, the owner may pay the money even if they did not prompt the lien.
  • Filing an appeal: This involves the owner and lienor going to court to resolve the dispute. As with litigation, it can be time-consuming and expensive.
  • Lien discharge bond: This attaches the lien to a surety bond rather than the property.

It is best to be cautious

The property owner may have done nothing wrong to prompt the mechanic’s lien, but it is still wise to put everything in writing when conducting real estate transactions. The purchase agreement will not only have the agreed-upon price, it also will outline all the other specifics of the deal. A valid contract can also hold the deal in place until the lien gets removed.