The law recognizes many types of liens on Real Property. A lien is a claim or a means for enforcing the obligations of the owner of real property to pay for it. Examples of liens placed on property include:
- A judgment lien placed on real property because a judgment issued by a court was not paid
- A tax lien on real property for the failure to pay to real estate taxes
- A brokerage lien placed on the real property for failure to pay a broker a commission
- A mechanic’s lien which is a claim placed on real property by a party who provided labor or materials to improve the property and was not paid.
“Mechanic’s” lien is merely a name and is not limited to mechanical work or work performed by a mechanic at a property (and not paid for by the owner.) Mechanics’ liens cover any person or entity that provides labor or materials intended to improve real estate such as a painter, plumber, electrician, contractor, subcontractor, material-man or other tradesmen.
In a commercial lease, a landlord will often require a “lien waiver” which is a document signed by the tenant that any work performed in the retail or office space was paid for and free and clear of mechanic’s liens placed on the owner’s building. On the other hand, the lease may contain a provision protecting the landlord from having mechanics’ liens placed on its property for work or materials furnished by a worker hired by the tenant to make an alteration or improvement to the space. If a mechanic’s lien is placed on the property, the tenant will need to provide a bond to cover the cost to have the lien removed. Failure to “discharge” (i.e. remove) a mechanic’s lien will be a breach under the lease.
An owner cannot sell a property to avoid clearing up a mechanic’s lien. A mechanic’s lien can will remain on the property even if the property is sold or otherwise transferred to a new owner. A title report will show a list of liens and should be addressed by the seller and purchaser before closing the sale.
A mechanic’s lien is a valuable tool, which offers protection for workers who perform services and provide materials to real property. The laws related to placing and removing (and bonding over) a mechanic’s liens are state and locale specific. In the end, consult an experienced real estate attorney for proper advice on mechanic’s lien laws in your state.