A mechanic’s lien is a claim of outstanding debt that is placed on your deed by the courts at the request of the tradesman you owe the money to.

The lien, or debt, will sit on your deed until you sell the property and at that point you must pay the debt in order to sell the house. It may, in the meantime, get in the way of securing a home-equity loan, and it may reflect badly on your credit rating. Liens on your property are no small matter.

RECORDKEEPING

But if you have the proper paperwork, the claim will vanish – like magic.

When you remodel, you sign a contract with a General Contractor. When you make payments along the way, you make the check out to the General Contractor – not to the plumber or the painter or any of the other actual tradesmen. How can you be sure that these tradesmen are being paid and that you won’t have to go to court over a mechanic’s lien? You can’t. What you can do is keep good records.

When you prepare a construction contract, be sure to include a task-by-task breakdown of the entire project scope of work, with the General Contractor’s price for each task. When you calculate a payment, do it on this "Task Abstract List" and show your calculations.

Each time you issue a check to the General Contractor, make a photocopy of the check and have the contractor sign and date the photocopy when he received the check. Also have a witness (not someone in your family) sign and date that photocopy, indicating that they saw you hand the check to the contractor. Keep that signed photocopy of the check, with the original signatures, stapled to a detailed progress evaluation spreadsheet, in your files.

PREVENTING THE LIEN

If a tradesman complains to the court that they haven’t been paid and they want to put a lien on your property, all you have to do is show the tradesman’s attorney or the court officer copies of your payments and the backup paperwork and the claim will never turn into a lien. The tradesman will understand that the General Contractor has his money, not you.

The only time you will have a problem is if you haven’t paid the General Contractor in accordance with the payment schedule stipulated in your construction contract. In that case, consult your attorney.

MORE INFORMATION

You’ll find lots more information about the home remodeling process in Managing a Renovation: Staying in Charge and Out of Trouble, our friendly and comprehensive homeowner’s guide to remodeling project management. Download the table of contents and a sample chapter, or go to the order form to purchase it.

We offer ready-to-use construction forms, including a complete remodeling contract, in our Bookstore, as well. Have a look.

And, you may want to look at our list of More Resources for some great design ideas.

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