Lien Laws and Payment Procedures Flashcards

What is a 'mechanic's lien' in construction?

Answer: A legal claim against a property by unpaid contractors, subcontractors, or suppliers for work or materials provided

A mechanic's lien (also called a construction lien) is a legal claim placed against the property by unpaid parties who contributed labor or materials, giving them a security interest in the property.

Who has the right to file a mechanic's lien in most states?

Answer: General contractors, subcontractors, material suppliers, and sometimes equipment renters who went unpaid

In most states, any party who provides labor or materials to improve a property — including subcontractors and material suppliers — has the right to file a mechanic's lien if unpaid.

What is a 'preliminary notice' (also called a pre-lien notice) in construction lien law?

Answer: A written notice sent to the owner early in the project informing them of the sender's potential lien rights

A preliminary notice is a statutory notice that subcontractors and suppliers must typically send to the property owner (and sometimes lender) early in the project to preserve their lien rights.

What happens if a contractor fails to record (file) a mechanic's lien within the statutory deadline?

Answer: They permanently lose their lien rights on that project

Missing the statutory deadline to record a mechanic's lien permanently extinguishes that party's lien rights, leaving them without the security interest in the property.

Which of the following would a 'conditional lien waiver' indicate?

Answer: The lien release is conditioned upon the receipt of a specific payment — if payment doesn't clear, the lien rights are preserved

A conditional lien waiver releases lien rights only upon the condition that a specified payment is actually received and clears, protecting the recipient if the payment fails.

What is a 'stop payment notice' in construction law?

Answer: A statutory remedy allowing unpaid subcontractors and suppliers to demand that funds be withheld from the general contractor until they are paid

A stop payment notice is a statutory tool available in some states that allows unpaid subcontractors and suppliers to direct the owner or lender to withhold contract funds from the general contractor.