There are a few things you may not know about mechanic’s liens, including what a mechanic’s lien is. We completely understand your confusion, and the team at Landmark Title Assurance Agency is here to answer any questions you may have about this type of commercial and residential property benefit.
A mechanic’s lien is defined as a security interest on the title of a property. The purpose of a mechanic’s lien is to secure payments to parties who have provided labor or materials for improvements on a property. According to Arizona statute, a mechanic’s lien is automatically in place when construction begins on a property.
A “recorded” mechanic’s lien is public notice of failure to make payment for labor or materials. If a mechanic’s lien has been recorded against a property, the lien claimant may begin foreclosure proceedings, which could result in the loss of the title to that registered owner’s property. At Landmark Title Assurance Agency, we specialize in highly complex, nuanced transactions that often involve multiple properties and states.
Having said that, our seasoned team of professionals have a comprehensive understanding of mechanics’ liens. Simply stated, mechanic’s liens are another factor that we are well versed in handling. Regardless, the team at Landmark Title Assurance Agency recognizes there are things property managers and homeowners may not know about this security interest. To help you better understand, in this blog we are answering five common questions about mechanics’ liens.
- Why is my lender increasingly concerned about whether or not work has begun on a project?
The lender may show some concern over whether or not work has begun on a project for many reasons. Mechanic’s liens attach to the property once work commences. The lender’s lien attaches to the property once the mortgage or deed of the trust is recorded. If work begins before the lender’s security instrument is recorded, any mechanics’ liens recorded as a result of nonpayment for that work are superior to the lender’s lien.
- What constitutes “work” on the project?
Commencement of work can take place well before “actual” construction work begins. Grading, demolition, landscape removal, etc., can all indicate work has begun on a property. Additionally, delivery of tools, building materials, construction trailers, dumpsters, temporary construction fencing, and more can establish the commencement date of a project.
- Construction work is finished on my property. Am I safe from mechanics’ liens?
Not necessarily. Contractors have up to 120 days after completion of work to record a mechanic’s lien if they have not been paid in full. Therefore, it’s important you communicate with your construction company/team to ensure all outstanding payments have been made.
- I paid my general contractor, but now a subcontractor has recorded a mechanic’s lien. Can they do that?
Yes, a subcontractor can record a mechanic’s lien. Arizona statutes permit either a general contractor or subcontractor to record a lien for unpaid amounts. It may sound unusual, but even if it is the general contractor’s responsibility to pay the subcontractors, an unpaid subcontractor can enforce a lien against your property. Again, communication is key when understanding what payments still need to be made on a project.
- What can I do to minimize the risk associated with mechanics’ liens?
Obviously, the first thing you should do is make sure you pay your bills in a timely manner. It may also be a good idea to obtain “lien waivers” from the contractor and his subcontractors as each invoice is paid. A lien waiver is a written statement by the contractor or subcontractor that states they have been paid in full or in part for their services. This waiver indicates the contractor or subcontractor can no longer assert a lien for the amounts that have been paid.
Overall, it’s important to note your title company is an important resource before, during, and after your construction project. If you have any questions or concerns about mechanics’ liens or anything else involving title when a property is also under construction, be sure to call Landmark Title Assurance Agency at (602) 748-2800. Do not hesitate to utilize our expertise!