Contract Law and Lien Rights Flashcards

What is a mechanics lien?

Answer: A legal claim against a property for unpaid construction work or materials

A mechanics lien is a security interest placed on a property to ensure contractors, subcontractors, and suppliers can be paid for their services.

Which of the following is typically required before a contractor can file a mechanics lien?

Answer: Serving a preliminary notice to the property owner

Most states require a preliminary notice (also called a pre-lien notice) to be sent to the property owner within a set timeframe as a prerequisite to lien rights.

What does 'prompt payment' legislation require of general contractors regarding subcontractors?

Answer: Subcontractors must be paid within a set number of days after the GC receives payment

Prompt payment laws establish mandatory timelines for passing funds down the payment chain from owner to GC to subcontractor.

A 'lien waiver' is signed by a contractor to:

Answer: Release their right to file a mechanics lien upon receipt of payment

A lien waiver is a document acknowledging receipt of payment and relinquishing the right to place a lien on the property for that amount.

What is the 'statute of limitations' for filing a mechanics lien?

Answer: A state-specific deadline by which a lien must be filed after project completion or last work date

Each state sets a deadline (typically 60–120 days) from the last date of work within which a mechanics lien must be filed or the right is forfeited.

Which clause in a contract states that a contractor cannot file a lien while awaiting dispute resolution?

Answer: No-lien agreement or lien waiver clause

A no-lien agreement or advance lien waiver clause contractually restricts a party's ability to file a lien during or after the project.