Mechanics Lien vs. Construction Lien

Payment for work completed or materials supplied in the construction industry should be made on time. Contractors, subcontractors, laborers, and suppliers often have to deal with delayed or withheld payments. They rely on legal remedies such as a mechanics lien or a construction lien to protect their interests.

What’s the Difference and Why It’s Important

Sometimes, Construction Lien and Mechanics Lien are grouped under a single heading. Slight differences, however, can impact the filing, enforcement, and maintenance of lien rights. It's important to understand the difference between a mechanics lien and a construction lien, and the rules applying to each. Some construction laws were originally designed to limit certain types of liens on building projects.

A lien gives an enforceable claim on a property so that unpaid parties can secure payment for their work and materials. By creating a lien, a contractor or supplier can keep the property from being sold, refinanced, or transferred until the debt is resolved, thereby compelling owners and property developers to address the payment.

It is essential to know the lien law by state and the procedures for filing liens; such knowledge can secure your payment or result in a complete forfeiture of your rights. In states such as California and Florida, the term “mechanics lien” is used, while in New Jersey and Michigan, “construction lien” is the official term. Knowing which applies in your state ensures you follow the correct procedure.

Both liens create a legal claim against property, preventing its sale, refinance, or transfer until debts are resolved. This compels property owners and developers to settle outstanding payments.

What Is a Mechanics Lien?

A mechanics lien is a statutory encumbrance placed on real property by a contractor, subcontractor, laborer, or supplier for work done or materials supplied and not paid for by the owner. The lien acts as security for the unpaid parties by creating a security interest on the property itself. In some states, a mechanics lien may be known simply as a construction lien, yet it is always best to know the exact term and requirements in your jurisdiction.

RESIDENTIAL VS. COMMERCIAL PROJECTS: In some states (e.g., Texas and Nevada), notice requirements are stricter for residential projects than for commercial ones. Missing these deadlines may invalidate lien rights.

What Is a Construction Lien?

A construction lien applies to work performed and materials supplied for the property. It protects contractors, subcontractors, and suppliers seeking payment. The absence of a lien may allow a property owner to avoid paying the workers and suppliers for their services.

This article aims to distinguish a mechanics lien from a construction lien, while also addressing the legal consequences that determine compliance, filing deadlines, and enforcement alternatives.

FEDERAL PROJECTS EXCEPTION: Mechanics or construction liens cannot be filed against federal government property. Instead, contractors must rely on payment bonds under the Miller Act to secure payment on federal projects.

Key Difference Between a Mechanics Lien and a Construction Lien

A mechanics lien usually relates to unpaid labor or materials for improvements, while a construction lien may refer to a larger scope of debt claims on a construction project. The most common variations lie in terminology, procedural requirements, and enforcement methods as defined by each state's lien laws.

Establishing a mechanics lien generally requires notice requirements, such as notices sent beforehand to the property owner, contractor, or lender. Construction liens, on the other hand, may follow a similar procedure but differ in timelines, filing methods, and the parties from whom they may be filed. The underlying purpose remains to secure payment and to claim an encumbrance on the property as a way to push toward a speedy resolution.

How to File a Mechanics Lien

The filing of a mechanics lien in the United States requires attention to legal details and strict compliance with procedural rules. In general, statutory procedures for the enforcement of a mechanics lien include the following:

Enforcing the Lien: In some instances, a creditor must file a lien suit within a certain period of time. Since liens are enforced through foreclosure, the claimant must initiate a foreclosure action on the property where the lien is placed.

Release of the Lien: After the debt is satisfied, the release must be filed to clear the title of the property from any encumbrances. The lien release is necessary to enable official acts, such as the transfer, refinance, or sale of the property.

Correctly following the law by operating within the correct procedure for applying for a mechanics lien is crucial to getting your payment and protecting yourself legally.

DEADLINE VARIATIONS: In California, lien claims must generally be filed within 90 days of project completion. In New York, contractors often have 4 months. Missing these deadlines forfeits lien rights.

Lien Laws by State

Lien laws vary from state to state. The requirements for who can file a lien, the notices required, the deadlines for filing, and the procedures for enforcing a lien all differ depending on the jurisdiction.

For instance, a few states require material suppliers or subcontractors to give notice 20 days prior to filing, whereas others have different deadlines for residential and commercial projects.

Therefore, contractors and subcontractors should study local laws or, better yet, seek legal advice about the requirements in their jurisdiction. Failing to observe state-specific requisites may completely forfeit lien rights.

• California: Preliminary 20-day notice is required for subcontractors and suppliers.

• Florida: A lien must be filed within 90 days of last furnishing labor or materials.

• Texas: Monthly notices to owners and lenders are required by the 15th day of the month following the work.

Contractors should study their state’s lien statutes or seek legal advice to avoid losing rights.

Using Technology to Manage Liens

Lien management is made easier for contractors, subcontractors, and suppliers by platforms like The Credit App. Contractors can track work performed, record lien documentation, view deadlines, and track payments efficiently using the app. Technology helps construction professionals with lien filing and enforcement processes that are time-consuming, error-prone, and complex.

The Credit App also helps contractors gain an understanding of mechanics liens, construction liens, and lien laws by state, so that they may protect their rights to the letter of the law.

Best Practices for Filing Liens

• Keep Records Up to Date: All work, materials supplied, and payments require proper tracking. Documentation is essential if enforcement becomes necessary.

• Send Notices Appropriately: To safeguard lien rights, you must serve initial notices without fail.

• Know Your State’s Specifics: Each state imposes different deadlines and procedural rules; know the specifics of your project’s location.

• Ensure Payment Before Release: Before signing off on lien releases, be certain the payments have cleared to avoid prematurely waiving rights.

• Attorney Consultation: Construction liens are complex, and errors in filing or service that result in denied claims can be costly. Consider an attorney or a resource such as The Credit App for compliance.

Conclusion

A mechanics lien and a construction lien are essential tools for securing payment in the construction industry. Whether as a general contractor, subcontractor, or material supplier, staying current with lien laws, filing procedures, and enforcement options will help protect your rights and allow projects to progress smoothly, minimizing payment disputes.

EXPERT TIP: Since lien laws are state-specific, contractors working across multiple states should develop a compliance checklist for each jurisdiction to avoid costly mistakes.