The construction industry is one of the most dangerous job sectors in the world today; still, contractors passionately persist in their work, diligently meeting the needs of their clients. However, despite their best efforts, there are cases where their clients may refuse to pay them or become unable to do so due to financial difficulties. For this reason, North Carolina has put in place safeguards to protect contractors from such situations. These include construction liens.
Understanding construction Liens (mechanics liens)
A lien, as you may know it, is a right to keep possession of property belonging to another person until they pay all their debt. In construction, a mechanic lien is not a right to keep possession but rather a legal claim against the property that a contractor has improved or built. It is essentially like an insurance policy for contractors, ensuring they get paid for their work.
How construction liens work
Once a contractor completes their work on a property and the client fails to pay, the contractor can file a lien against the property through their state’s county clerk. The clerk will record it, and it will become a public record, informing any potential buyers or lenders that there is a legal claim against the property.
The next step would be for the contractor to notify the property owner of the lien through certified mail. If this notice goes unanswered within a specified timeframe, typically 15 days, as dictated by construction law in North Carolina, the contractor can initiate a lawsuit to enforce the terms in the lien.
Preventing construction liens
As much as construction liens offer protection for contractors, it is in their best interest to prevent them from happening in the first place. One can prevent them by having a well-drafted contract clearly outlining payment terms and deadlines. Or by regularly communicating with the client and addressing any payment issues as soon as they arise.
In the dynamic world of construction, understanding and effectively handling construction liens is paramount. Even if they serve as a safety net for contractors, it is crucial to take all precautions to prevent them from happening. Sometimes, it can be time-consuming and costly to resolve these disputes, which can significantly affect your business as a contractor.