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Construction law explainer: What’s a mechanic’s lien?

On Behalf of | Nov 10, 2020 | Construction law |

St. George construction projects are typically launched with smiles, signatures on contracts and firm handshakes. Sometimes the smiles fade, however, and contracts are reexamined in order to determine if all parties are adhering to all its terms.

Unsurprisingly, many construction law disputes revolve around payments or lack thereof. We’re going to take a look in this Utah Business Law Blog post at a legal tool that can be used under Utah law by contactors, subcontractors, anyone who furnishes or rents equipment or materials and anyone who performs services to improve the property (architects, engineers, etc.).

A way to get paid

A mechanic’s lien – a legal claim against a property – is often a means of getting paid. However, the property owner can sometimes be confronted with a mechanic’s lien, even though they aren’t the one who missed making payments.

For example, if you’re a St. George business owner who has hired a general contractor to replace your business’s parking lot, but the general contractor didn’t pay the concrete mix supplier, that supplier can put a mechanic’s lien against your property to recover his money.

The property owner can be held responsible for missed payments to suppliers, subcontractors and others – and you (or your company) can be held financially responsible even if you’ve already paid the general contractor.

What a mechanic’s lien does

A mechanic’s lien comes up in a title search of the property, and effectively means the property can’t be sold or refinanced or otherwise transferred without the lien being paid off.

On bigger projects, the construction is often financed by a lender (such as a bank) that has a mortgage against the project property to safeguard the loan they’ve made. A mechanic’s lien can put a wrench into that funding process.

We’ll have more on mechanic’s liens in an upcoming post. Please check back with us.