While home renovations can be a great market for any contractor, they do come with a risk. A homeowner may not pay you for the job that you performed. Fortunately, New York contractors and building material suppliers are granted the legal ability to file for a mechanic’s lien.
The basics of a mechanic’s lien
Real estate law defines a mechanic’s lien as a guarantee of payment for services rendered to the property. Many contractors will make it a mandatory requirement to have a mechanic’s lien on any project before they get started. This way, they are guaranteed payment one way or another. In most liquidation cases, a mechanic’s lien is considered a high-priority debt. This means that it’s one of the first debts to get paid off during the liquidation.
Enforcing a mechanic’s lien
Just because you set up a mechanic’s lien on a project property doesn’t mean that it’s enacted. You’ll need to file the lien within a specified period of time after payment has lapsed. Each state has its own statutes of limitations that apply to mechanic’s liens. You must file before the statute of limitations expires, or you give up your right to seek compensation for the work performed or materials purchased.
Mechanic’s liens are available for subcontractors
If you’re a subcontractor who is hired onto a job, you have rights. If you’re not paid by the general contractor, you may file a mechanic’s lien against the homeowner. The homeowner is the one ultimately responsible for paying you.
As a building contractor, it’s vital that you understand what a mechanic’s lien is and how to use it. This type of lien can help to protect your revenue for each project that you take on. As always, it’s best to consult an attorney about drafting a mechanic’s lien to safeguard your interests.