Mechanics liens create significant problems for property owners. Contractors, subcontractors, or suppliers can file a lien against a property if they do not receive payment for work or materials. This legal claim blocks selling or refinancing until the owner pays the debt.
What is a mechanics lien?
A mechanics lien allows contractors, subcontractors, or suppliers to claim a property when unpaid. This lien serves as security for the debt owed. In Indiana, these liens apply to residential, commercial, and industrial properties. The law allows unpaid workers to file a lien to ensure fair compensation.
How does a mechanics lien impact property owners?
Liens stop the owner from selling or refinancing, creates legal disputes, and may lead to foreclosure if unpaid. The owner may struggle to sell or refinance the property until the debt is settled. Additionally, the lien can lead to foreclosure if the claimant takes legal action to enforce payment. Even if the owner already paid the general contractor, they may still be responsible if a subcontractor or supplier was not paid.
How can property owners avoid mechanics liens?
Property owners can take proactive steps to prevent liens. Requesting lien waivers from contractors and subcontractors upon payment ensures no claims will be filed later. Verifying that all parties involved receive their payments can also reduce risk. In Indiana, property owners can file a Notice of Commencement to require subcontractors to notify them before filing a lien. This allows owners to track payments and disputes more effectively.
What to do if a mechanics lien is filed against your property?
Owners should first verify a lien’s validity. They can negotiate with the contractor or supplier to resolve the issue. If the lien is incorrect or fraudulent, legal action may be necessary to remove it. Indiana law provides a process for challenging wrongful liens through the court system.
