Mechanics liens are treated as a last resort for solving non-payment issues in the construction industry, and these are challenging for everyone involved in the project. Therefore, it is the goal of every party to finish a project without a mechanics lien claim and run it smoothly.
Property owners want their construction projects to go smoothly to not only minimize cost overruns but also complete and open it in time for the public. With good communication, proper documentation, and little effort, mechanics lien can easily be avoided. This guide will give property owners clear steps to prevent lien claims on a job.
How Can Property Owners Prevent Mechanics Lien?
There are multiple ways to help owners avoid mechanic lien, as discussed below, but one major aspect of all these points is communication. Without an open communication channel with all the parties, your project cannot run smoothly. On that note, here are some steps to safeguard your property and avoid mechanics lien on the job.
Pre-Screen your General Contractor
Before selecting a General Contractor, project owners must put them through a screening process. Before drawing up a contract, look for a potential contractor based on their past projects, payment practices, and relationships in the construction sector.
Look into their previous jobs to get an insight into their business practices and make sure they don’t have a reputation for non-payment and other payment issues with subcontractors and suppliers in your area. This can be overwhelming; therefore, we recommend getting professional construction consultation to protect yourself from not only legal harm but also your property under the contract.
Ask GC to take preliminary notices from all parties
Most of the time, GC takes care of the project and overlooks all the tasks, including payment. So, it is very frustrating for the owner to receive a mechanics lien from a subcontractor or a supplier about something that they did know existed. Therefore, property owners should talk to their GC to make sure that all the relevant parties on the project sign preliminary notices before starting construction work.
Through these notices, property owners can keep track of all parties working on the construction project and make sure they are paid in full for their services. It also helps owners ensure that timely payments are being made on the project, so there is no threat of a lien.
Ask GC to collect a signed conditional lien waiver
Before the starting of the project, ask the contractors to submit conditional lien waivers. This is not only beneficial for the owner but all the parties because a conditional lien waiver only waives lien rights only when the payment has been received in full.
Similarly, a signed conditional lien waiver by subcontractors and suppliers not only protects the owner but also his property from a legal claim once the payment has been settled (all parties paid in full). There will be no pushback for such waivers, as the other parties are contented to receive their payments in full.
Protect payment by issuing joint checks
Issuing of joint checks is an excellent way to not only avoid mechanics lien but also make sure there is no double payment. When the owner makes payment through a joint check, all the parties on the project need to endorse it before the release of funds.
For example, if a subcontractor and suppliers are parties of a joint check, then before a subcontractor cashes the check, he needs to get it endorsed by the suppliers. This basically ensures that subcontractors will pay suppliers and other parties. This way, you can avoid suppliers from filing a lien for non-payment.
Ask GC to secure a payment bond
Payment bonds tend to protect the owner of the project by substituting the property for the purpose of a claim. A payment bond transfers all the risk of non-payment that might come with a mechanics lien, from property to the surety of the bond. In such cases, of a subcontractor does not receive timely payment, then he can file a claim against the bond, instead of the property.
Asking the GC to secure a payment bond might increase the contracted price of the GC, but it will pay off in the long run as subcontractors and suppliers cannot make a claim against your property. Issuing of payment bonds helps owners to avoid mechanics lien from the beginning of the project, so, get in touch with a construction claim consultant in Dubai and protect your property against a claim.
Make all payments on time and in full
This is one of the basic rules of the construction industry, but we have put it here as a reminder. Timely payment is crucial for owners if they want to avoid mechanics lien and other legal consequences. A mechanics lien is the most useful tool for contractors and subcontractors in case of non-payment.
Therefore, paying every party on time is the best way to ensure that they don’t use mechanics lien against you to settle their payments. As long as owners are making payments in a timely fashion throughout the project, there is no need/ chance for a mechanics lien to be filed.
Avoid Mechanics Lien at All Costs!
Every party involved in the project, be-it owners, GC, subcontractors, and suppliers, wants to avoid a mechanics lien as much as possible. If every party does their job on time and payments are scheduled on time, then the project runs smoothly.
Therefore, keep the detail of all documents/ invoices and make payments on time to complete your project lien-free.