Mechanics liens are a contractor’s best friend when it comes to nonpayment in the construction industry. Unfortunately, nonpayment occurs more frequently than it should, so contractors need to be diligent of their right to file a mechanics lien against an owner who is withholding payment, regardless of the reason they have expressed for doing so. However, with great power comes great responsibility, and the mechanics lien is simply too powerful to be recklessly abused.
If you consult a Charlotte construction lien attorney, they will express a similar sentiment about the mechanics lien. It is absolutely and unabashedly the great equalizer between contractors and owners, or even subcontractors and contractors, but the legal repercussions of filing fraudulent liens could spell the end of a contractor’s career. In this two-part article, a Charlotte mechanics lien attorney from Cotney Construction Law will explain why abusing liens in the construction industry is a bad idea.
The Intent of Mechanics Liens
When a contractor files a mechanics lien against an owner, the owner is typically responsible for fulfilling the payment that was agreed upon in the building contract. In some cases, owners will claim that work was insufficient or that the contractor voided the contract by billing for extra work, but in many cases this is simply smoke and mirrors used to undercut the contractor and save money. Fortunately, mechanics liens are a tried and true method of legal recourse that allow contractors to tighten their grip on owners who are playing “keepaway” with compensation.
Lien on Me?
Remember, as a contractor you’re responsible for compensating your subcontractors and materials suppliers, too. Therefore, you’re at risk of being hit with a lien if you are unable to compensate your workers. More often than not, this is a result of a nonpayment from the owner which means a single nonpayment can spark a chain reaction of liens. With that being said, if you jump the gun on filing a lien or file a lien maliciously, you could find yourself in court being forced to pay damages. Although mechanics liens are intended to level the playing field for contractors and owners, exploiting them to leverage your power incorrectly is unbecoming and could seriously compromise your reputation.
There are an array of circumstances that can arise in which one party files a fraudulent lien against another. Each case of a fraudulent lien filing must be considered on an independent basis; however, there are certain situations in which the fraudulent nature of a lien is nearly impossible to dispute. For example, a party who files a lien without having performed any verifiable instance of work will undoubtedly be deemed fraudulent. Another example would be a party who files a lien after already receiving due compensation for the work performed. We will discuss fraudulent liens in detail in part two.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.