Mechanics Liens

The Basics:

Mechanics liens are generally filed by contractors or suppliers who have not been paid for services or materials provided. Mechanics liens may be filed any time within 90 days of when the contractor or supplier last performed work or supplied materials on the property. The effective date, or date determining the priority of the lien is when the very first work commenced or when the first supplies were delivered in connection with the construction. Even though recorded after a warranty deed or deed of trust, a mechanic lien may have a senior priority date.

The Problem:

Mechanics liens may become a cloud on title even before they become “of record”. Title searches are performed using recorded or filed documents. Where mechanics liens can be retroactive, the title company has to look at the possibility or signs of mechanics liens becoming of record at a later date (recent construction or improvements to the property). Even with title coverage against mechanics liens, buyers are not shielded from the hassles of mechanics liens cropping up at a later time.

The Solution:

Before title can be insured against mechanics liens the title company needs to be assured that any construction work or improvements on the property within the past 90 days have been paid for. This assurance may come through one or more of the following: 1)Lien waivers from all contractors and suppliers. 2)Sufficient money in escrow. 3)Indemnification from seller and general contractor. ASK THE RIGHT QUESTIONS. To protect your buyers, agents need to find out what construction work has been performed and when, and make sure that all contractors and suppliers have been paid.

The contents contained herein are intended for general informational purposes only, and should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. Anyone needing specific legal advice should consult an attorney.

Courtesy of Equity Title of Utah