• A mechanic’s lien is a legal claim that allows unpaid contractors and suppliers to place a hold on your property, potentially forcing its sale to get paid for their work.
• Mechanic’s liens can take priority over mortgages because they date back to when construction started, not when they were filed.
• Smart investors protect themselves by making staged payments, holding back final payment, and getting signed lien waivers throughout the project.
• You must get lien waivers from all subcontractors, not just your general contractor, because you could end up paying twice for the same work.
• An active mechanic’s lien can trigger mortgage default and block any sale or refinancing of your property, even if your mortgage is current.

A “mechanic’s lien” is a legal claim that allows contractors, subcontractors, or material suppliers to place a lien on a property owner’s real estate if they are not paid for work performed on that property.

When someone files a mechanic’s lien, it creates a legal claim against your property. This means the contractor who filed the lien could compel you, the property owner, to procure a means of payment for their services, including the sale of your property. The lien also shows up in title searches, which can stop you from selling or refinancing until you settle the debt.

Thomas Jefferson first developed the legislation supporting mechanic’s liens to ensure contractors get paid. Back then, the term “mechanic” referred to any construction worker performing manual labor, which is closer to the modern terms of “builders” or “tradespeople.” This usage predates the modern association of “mechanic” with automobiles.

These liens now provide contractors, subcontractors, and material suppliers with a means of payment when a property owner fails to pay them for improvements.

Mechanic’s liens present major roadblocks for property owners and real estate investors.

• Selling: Title companies are generally wary of properties with a mechanic’s lien, often requiring additional conditions to mitigate risk. Most buyers also won’t touch a property with a lien; those who do will often demand a much lower price to cover the risk.
• Refinancing: Banks don’t want to lend money on property with mechanic’s liens. The liens might take priority over the bank’s new mortgage, which means the bank could lose money if someone forecloses on the lien.
• Property values: Properties with mechanic’s liens often sell for less than their true value. Buyers know they’ll have to deal with the lien, so they subtract not just the lien amount but also extra money for potential legal costs and hassles.
• Loan complications: If you’re getting a construction loan, the bank will want proof that no one can file mechanic’s liens. This means you’ll need to get lien waivers throughout the project. Often, banks withhold money from each payment to ensure that all contractors and suppliers receive their payments.

RELATED: How to Find Out If There Is a Lien On a Property

Let’s break down what happens when someone files a mechanic’s lien on your property:

The Filing Process

The contractor must record the lien at your local county recorder’s office. They must also tell you about the lien, usually by sending you a copy in the mail. The lien becomes part of your property’s public record, which means anyone can find it when they search your title.

Time Limits

Each state sets strict deadlines for filing liens, and missing these deadlines by even one day can make the difference between a valid lien and one that gets thrown out.

But here’s the tricky part: these time limits work both ways. If someone files a valid lien, you also have to watch the clock. In most states, the contractor must take legal action within a certain time after filing the lien—often a few months to two years. If they don’t, the lien becomes invalid (note that this varies by state; in Virginia, for example, the time of enforcement is six months from the date of lien recording or 60 days from project completion, whichever is later).

Smart property owners keep track of these dates; they know exactly when a lien was filed and when it expires. This knowledge might allow you to wait out a lien instead of paying it, especially if you think the contractor won’t follow through with a lawsuit. But you need to be absolutely sure about your dates, since getting them wrong could cost you your property.

Priority Rules

Most construction liens date back to when work first started on the project, not when the project was completed. This means they might take priority over other liens filed after construction began—even mortgages. This “relation back” rule makes mechanic’s liens powerful tools for contractors but risky for property owners.

Here’s a table detailing the typical priority order for liens:

Property owners often make expensive mistakes when dealing with mechanic’s liens. Understanding these mistakes can help you avoid serious problems with your real estate.

Not Getting Everything in Writing

Many property owners trust contractors they’ve known for years and skip written contracts. However, this trust can backfire when subcontractors don’t get paid.

Even if you’ve worked with a contractor for decades, always get a written contract that spells out exactly what work they’ll do and how much it will cost. This protects you if something goes wrong.

Paying Too Much Up Front

Some contractors ask for large down payments before starting work. You risk losing money if the contractor disappears or doesn’t pay their suppliers.

Instead, set up a payment schedule that matches the work being done. Pay in stages as work gets completed, and always hold back some money until the job is finished. The video below explains how to shop around for contractors and when to pay them:

Making Final Payment Too Soon

Conversely, you shouldn’t make your final payment too soon. Many property owners rush to pay the final bill as soon as work is done. This can leave you open to liens from unpaid subcontractors or suppliers.

Instead, wait a few weeks after the work is finished before making the final payment. This gives unpaid parties time to notify you if they haven’t received their money. Some states even require you to hold back a certain amount for a specific time after completion, known as “retainage.”

The release period of a retainage is state-specific; for example, in California, it’s 45 days, while in New York, it’s 30. Consult the rules in your state and jurisdiction for particulars.

Not Tracking Your Payments

Another dangerous mistake is keeping payment records in your head instead of on paper. Many property owners think they’ll remember who they paid and when. Others just stuff receipts in a drawer without organizing them. This casual approach can backfire when a contractor claims they weren’t paid for work from months ago. Without written records and lien waivers, it becomes your word against theirs, and courts want to see paper proof, not hear your memories.

Some digital platforms like Relay allow you to list down and track your payments, which is useful if you’re a real estate professional. Watch how it works in our review below:

Whether you want to track your payments the old-fashioned way or using an app, remember: if it’s not in writing, it might as well not exist when it comes to mechanic’s liens. Don’t trust your memory to protect your property.

Not Getting Lien Waivers

Speaking of waivers, every time you pay a contractor, get a signed lien waiver. This document says they give up their right to file a lien for the work you just paid for. Get these from subcontractors too, not just your main contractor.

Each time you make a payment, get a lien waiver in exchange. If your contractor says “don’t worry about it,” that’s exactly when you should worry.

Ignoring Preliminary Notices

When contractors send you notices about their right to file liens, it’s tempting to ignore these “routine” papers. This is a big mistake.

These notices are legal documents that start the clock on potential liens. Read every notice carefully and keep copies. If you get a notice from someone you don’t recognize—like a supplier you never dealt with—ask your general contractor about it right away.

Trying to Handle Liens Alone

When someone files a lien, many owners try to solve it themselves to save money. This often leads to bigger problems.

Mechanic’s lien laws are complex, and making a mistake can cost you your property. If someone files a lien, talk to a real estate attorney who knows construction law. The money you spend on legal help usually saves you more in the long run.

Ignoring Your State’s Rules

One of the costliest mistakes property owners make is ignoring their state’s mechanic’s lien rules. Many owners assume these rules are the same everywhere or that they don’t really matter.

But each state has different rules about when contractors can file liens, what notices they must send you, what makes a lien valid, and more. Getting these rules wrong means you might lose your chance to fight an unfair lien, or you might not even know about a lien until it’s too late.

Can a contractor file a lien if I have a written contract?

Yes, they can. A written contract doesn’t stop someone from filing a lien; it just helps prove what work they agreed to do and how much you agreed to pay. If you don’t pay the amount in the contract, they can file a lien even though you have a written agreement. The contract actually helps them prove they have the right to file a lien.

That said, while a written contract is generally not required to file a mechanic’s lien, some states have specific stipulations. In Arizona, for example, claimants can only file a mechanic’s lien on owner-occupied residential projects if they have a written contract with the owner. An “owner-occupied dwelling” refers to a property where the owner holds title and intends to reside in the dwelling for at least 30 days within a 12-month period after the project’s completion.

What happens if I paid my general contractor but they didn’t pay their subcontractors?

You might still face liens from unpaid subcontractors, even if you paid your general contractor in full. This is why getting lien waivers from all subcontractors is crucial.

Some states have laws that protect homeowners from paying twice, but in many cases, you might have to pay subcontractors again—even though you already paid the general contractor. You can then sue the general contractor to get your money back.

How do mechanic’s liens affect my mortgage?

A mechanic’s lien can trigger a default under your mortgage terms, even if you’re making all your payments on time. Most mortgage agreements require you to keep the property free of liens. Your lender might require you to clear the lien or face foreclosure. If you’re getting a new mortgage, you’ll need to clear any liens before closing.

Note that a default does not automatically get to foreclosure. Federal law generally prohibits lenders from starting foreclosure until the borrower is more than 120 days past due, with the foreclosure process thereafter depending on the state.

For more information, read our guide to the foreclosure timeline and process, “When Is It Too Late to Stop a Foreclosure? And How to Do It at the Last Minute.”

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