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What Is Mechanic’s Lien? – The Working Structure

If you have a construction business, whether you are the owner of the real estate or a contractor, New York Mechanic’s Lien is the term that you hear the most. They are also known as the property lien or construction lien. So, what do you mean by a mechanic’s lien? Or, how does it work? Well. We will answer all your questions in this blog post. Let’s have a look.

What Is Mechanic’s Lien?

Mechanic’s Lien is a legal document that preserves the rights of those who want to claim compensation in case of non-payment by the other party. It is generally filed by the suppliers, contractors, and subcontractors who fail to receive the payment of the work accomplished or materials sold for the construction project. 

The purpose of a mechanic’s lien is to generate a title cloud and appear in public property records. 

How Does Mechanic Lien Works?

Following are the functions of the New York Mechanic’s Lien:

  • Encumbering The Property

Mechanic’s lien is generally kept with the land records and materializes during the title search of the property. The mechanic’s lien is filed by the contractor when he is unpaid against the sale of the home. After the sale takes place, the contractor receives the payment from both the buyer and seller and then the lien is removed.

  • Grabs The Attention Of The Lender

In the construction business, the lender refers to the bank or third-party lender. These lenders provide loans against the property to secure the claim. After registering the mechanic’s lien, the contractor arbitrates in the interest of the claim. It grabs the attention of the lenders, and they barge into a non-payment situation to resolve the claim.

  • Acts As A Contract To Be Breached

All the construction projects are subject to the contract. All these contracts have a provision that makes the party keep the property free and without any liens. When a New York Mechanic’s Lien is laid against the property, the property makes the other party in breach. It poses immense pressure on the other party to resolve the claim as soon as possible. 

  • Sets A Payment Deadline

Mechanic’s lien solves the problem of non-payment. There is no chance for the other party to refuse the payment when the sales take place. Therefore, the mechanic’s lien sets a payment deadline for resolving the claim. Moreover, it avoids any kind of litigation.

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