How COVID-19 Has Affected Mechanic’s Liens

Originally published by Cris Feldman.

When having renovations done or a new build on a property, it’s important that the contractors and other laborers are compensated properly for their work – even during an ongoing pandemic. When this doesn’t happen, a mechanic’s lien can then be placed on that property. Therefore, it’s important to understand what actions could result in the successful filing of a mechanic’s lien and how the COVID-19 pandemic could impact future lien filings for contractors and property owners alike.

Mechanic’s Liens

Also known as a construction lien, a mechanic’s lien is a legal document that can be filed in order for contractors and laborers to collect payment for completed work on a property in the event the property owner does not pay. Mechanic’s liens are important and they become a matter of public record to ensure any future buyers or lenders know the property owner has outstanding debts owed to those who performed construction work on the property.

Liens are also serious indicators of a potential property foreclosure and demand that a property owner negotiate for an amicable resolution or dispute the lien instead of facing foreclosure. In the event the property owner attempts to sell the property with a valid mechanic’s lien attached, a property title search will show it and this may ultimately lead to prospective buyers and/or refinance lenders requiring it be paid off before a purchase is closed. These liens prevent negligent property owners from failing to pay for any improvements to the property as a means to sell it for profit without paying the construction team for their work.

Who Can File a Lien?

When a mechanic’s lien is filed, it grants the contractor or supplier on the construction project a legal claim against the property where the labor or materials have been provided but not paid for, thus allowing them to become a creditor of the property. With this in mind, only the following professionals are able to file a mechanic’s lien for unpaid work:

• The general contractor on a project
• A subcontractor who only provided one service, such as electrical work or installation
• A materials supplier for the project

In the event any of these of professionals performed their role under contract, can prove it was completed satisfactorily and were not paid for their work, their lien against the property and its owner will be entered into public record.

Mechanic’s Lien Claims and COVID-19

The ongoing COVID-19 pandemic has had a major effect on various industries in Texas and across the nation, and construction is no different. According to a recent Construction Payment Report, the coronavirus pandemic upended the construction industry as a whole due to the shutdown or rescheduling of projects. Even considered in some states to provide essential services, contractors have faced financial strain from stalled funding and slower payments.

Despite this, however, the pandemic did lead to a surge of construction-related disputes – including mechanic’s liens. In fact, from February to April of this year, mechanic’s lien claims jumped as much as 63%; as even with a rise in bankruptcies and a dramatic economic contraction, 39% of contractors say they did not change their business practices in response to the pandemic.

Houston Construction Attorneys

Despite the ongoing COVID-19 pandemic, construction disputes have been on the rise. Because these projects are often complex and require specific materials, labor, financing, and other resources to be completed, disputes (including mechanic’s liens) often require the insight of a Houston construction attorney. At Feldman & Feldman, we have represented construction clients throughout the duration of their projects – working to solidify contracts and handle any disputes before, during, or after a project. If you are a contractor or construction professional left unpaid for your work and are considering filing a mechanic’s lien, contact the attorneys at Feldman & Feldman today to discuss your needs.

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