Lien Laws and Payment Procedures Flashcards

Which federal law provides lien-like protections for subcontractors and suppliers on federal government construction projects (where liens on government property are not allowed)?

Answer: Miller Act

The Miller Act requires prime contractors on federal projects over $150,000 to furnish performance and payment bonds, giving subcontractors and suppliers bond claim rights in lieu of mechanic's liens.

What is a 'materialman's lien'?

Answer: A lien filed by a supplier of materials against the property to which the materials were incorporated

A materialman's lien (a type of mechanic's lien) is filed by a material supplier who provided materials incorporated into the project but was not paid.

If a property owner pays the general contractor in full but the general contractor fails to pay subcontractors, in most states:

Answer: Unpaid subcontractors may still file mechanic's liens against the owner's property if they followed proper procedures

In most states, unpaid subcontractors who properly preserved their lien rights can still lien the owner's property even if the owner paid the general contractor in full.

What is a 'sworn statement of account' or 'contractor's affidavit' often required before final payment?

Answer: A sworn document listing all subcontractors and suppliers and confirming they have been paid or will be paid from the final payment

A contractor's affidavit or sworn statement lists all subcontractors and suppliers involved in the project and certifies that all have been paid or will be paid from the final payment, protecting the owner from liens.

How does recording a mechanic's lien affect the property owner's ability to sell or refinance the property?

Answer: It clouds the title, making it difficult to sell or refinance until the lien is resolved or bonded off

A recorded mechanic's lien creates a cloud on the property title, which must typically be resolved, paid, or bonded before the owner can sell or obtain new financing.

What is the purpose of a 'lien waiver' exchanged at the time of payment?

Answer: To release the payee's lien rights up to the amount paid, protecting the owner and general contractor from future lien claims for that payment

A lien waiver documents that the receiving party releases their lien rights (in full or conditionally) for the payment amount received, providing a paper trail that protects owners from duplicate claims.