As a homeowner, it can be extremely frustrating to watch your planned home remodel or repair turn into a contractor dispute, with the contractor ultimately trying to force your hand on payment by filing a lien on your property.
Liens serve as a cloud on title, making it difficult for to sell a home or even refinance it through a bank. Don't panic, however: In the short term, it's unlikely that the contractor can use the lien to force a sale on your home.
What can you do to get rid of a pesky lien? There are three main ways to remove a lien from your property's records:
We'll discuss all three steps below
The easiest, and most common, method of removing a lien from a property is to negotiate a settlement with the contractor who filed it. Unfortunately, this will sometimes involve paying the contractor money that you feel the contractor is not entitled to.
Consider ways to be creative. Perhaps the contractor will accept a lower amount of money in exchange for a quick payment, or payment over several months. Or perhaps the contractor would consider doing a bit of extra work, including changes to the existing work, if you promise to pay.
Contractors would often rather negotiate a payment rather than get bogged down in liens and litigation, which are time-consuming.
Fortunately, once you reach a settlement, it's fairly quick and easy for the contractor to release the lien. Often, these are one-to-two page notarized documents filed with the same county clerk that accepted the original lien.
As the owner of the property, you have the ability to obtain a bond from an insurance company that would cover the amount of the lien. These are sometimes called surety bonds or lien discharge bonds.
These are somewhat complex financial instruments; you should meet with an insurance company to determine the type of bond most appropriate for your situation. Any large insurance company would likely be able to help you obtain one.
How does it work? The surety company, through the bond, essentially provides substantiation to the county clerk that you have the means to pay for the mechanic's lien, if you are ultimately obligated to do so.
This removes the lien from your property. The lienor's claim becomes attached to the bond, rather than attached to the property. This process is sometimes referred to as "bonding off" the lien.
It is normally necessary to file a bond in order to remove a lien only if you believe that you need to sell or refinance your home relatively quickly. If not, you might be better off fighting the lien in court or negotiating a payment with the contractor to remove the lien voluntarily.
The most drastic method of removing a lien from your property is to fight the lienor in court. Depending on the jurisdiction (laws on mechanics' liens vary state by state), this is sometimes called an action to "vacate" or "discharge" a mechanic's lien.
For this type of legal action, you will likely need to retain an attorney whose practice focuses on construction or real estate law. A lawsuit will force the contractor to establish a case for why you allegedly owe money.
Conversely, you will argue, through testimony and evidence, that you do not owe money, and that (perhaps) the contractor's work was shoddy or did not match the scope of work required under the contract.
If you win this litigation, the court can order that the lien be stricken from the property record. The court may also award you additional damages (although it is rare to recover attorneys' fees).
Like any lawsuit, an action to remove a lien can be unpredictable, expensive, and time-consuming. The process can take months, or even years. The contractor can appeal an unfavorable decision. In other words, litigation should usually be a last resort for a homeowner, particularly if time or money are serious concerns.