A Quick Homeowner’s Overview of Mechanic’s Liens

First established in 1825, the Mechanic’s Lien Act helps to ensure that construction and remodeling contractors receive the payment due for their products and services. This law states that a contractor, subcontractor or supplier may file a lien against a property if the owner does not pay for the completed work. In other words, a homeowner’s property becomes collateral for the money owed.

As with a mortgage, an unpaid mechanic’s lien may lead to the threat of foreclosure. An unresolved lien may also negatively impact a homeowner’s ability to refinance, borrow against or sell the property.

How Do Homeowners Know if There Is a Lien on Their Property?

In Illinois, a contractor must file a lien within two years of a project’s completion. The contractor must also provide the homeowner with written or verbal notice of a lien within 10 days of recording it. If a claimant does not give timely notice and a property owner suffers damages as a result, those damages may reduce or extinguish the amount of the lien.

What Are the Options for Resolving a Mechanic’s Lien?

The most obvious way to resolve a lien is to pay for the services rendered. However, if an owner facing foreclosure cannot pay the amount in full, there are three basic options for resolving the issue. An owner looking to sell a property may be able to arrange for a title insurance policy that covers the lien.

As of 2015, Illinois homeowners may also be able to substitute a surety bond for the lien, effectively freeing the property. Finally, individuals may be able to negotiate a lower price with the contracting company, which may prefer immediate payment to delay or litigation.

How Can Homeowners Avoid a Mechanic’s Lien?

Frequently, it is a subcontractor or supplier who files a lien against a property when a general contractor fails to pay them. Illinois law requires contractors to provide a complete list of all employees and businesses involved in a project, as well as a breakdown of payments due. Before paying for completed work, homeowners should obtain a lien waiver from all contractors and subcontractors.