Understanding Construction Liens: A Homeowner’s Guide

Close-Up Photo of an Client and Architect Planning Renovation

Attorney Sean P. GriffinUnderstanding construction liens is crucial for homeowners to safeguard their property during home improvement projects. In this article, Attorney Sean P. Griffin discusses construction liens and how homeowners can stay informed to ensure smooth real estate transactions later.

As a homeowner, understanding construction liens is essential to protecting your property and navigating the complexities of home improvement projects. Let’s delve into the basics and explore how these liens impact homeowners:

What Is a Construction Lien?

A construction lien is a legal claim that contractors, subcontractors, or suppliers can place against your property if they haven’t been paid for their work or materials. Here’s what you need to know:

  1. Securing an Interest: When someone contributes to a building project (such as construction, renovations, or repairs) but isn’t compensated, they can secure an interest in the property itself. This means that the lienholder gains a stake in the property being built or improved upon.

  2. Statutory Protection: Construction liens are available to contractors and subcontractors who meet certain requirements. They provide statutory protection to those who go unpaid or underpaid after providing labor, supplies, or equipment for a construction project.

Why Do Construction Liens Exist?

Construction projects involve significant upfront costs for contractors and suppliers. However, payment from property owners or lenders often comes later, after work has been completed and materials have been put in place. Unlike retail goods, improvements to real property cannot be returned or resold. Therefore, construction liens exist to address the following:

  • Delayed Payments: The payment chain in construction can be slow, making it challenging for contractors and suppliers to cover their costs promptly.

  • Nature of Construction Work and Materials: Contractors can’t reclaim their work or materials if the owner doesn’t pay. They can’t simply take back the product and sell it elsewhere.

How Construction Liens Impact Homeowners:

  1. Property Transactions: When selling your home, a title search reveals any issues related to the title, including liens. Unresolved liens can delay or complicate the sale.

  2. Refinancing: If you plan to refinance your mortgage, existing liens can hinder the process. Lenders want a clear title before approving refinancing.

Advice for Homeowners:

  1. Watch Out for Preliminary Notices: Contractors and suppliers may send preliminary notices to inform you of their involvement in the project. Pay attention to these notices.

    • Wisconsin Statute Requires that all Prime Contractors who contract directly with an owner and who contract with any subcontractor or material supplier provide notice of their lien rights to the owner of the land, prior to or within 10 days of the commencement of work.

    • Wisconsin Statute also requires that notice be given by all contractors, subs and suppliers who are not contracting directly with the owner of the land. However, no notice is required where:

      • (1) the project is residential and provides or adds more than 4 dwelling units, or
      • (2) where the project is at least part non-residential, or
      • (3) where the prime contractor is an owner of the property. Wis. Stat. § 779.02
  1. Lien Filing Deadlines: Each state has specific deadlines for filing construction liens. Be aware of these timeframes to protect your interests.

    • Prior to filing a lien, a contractor or subcontractor, must provide written notice of their intent to file a lien claim on the owner of the land at least 30 days before filing. Wis. Stat. § 779.06

    • Thirty days after serving this preliminary notice, a contractor or subcontractor may file a lien against the land.

    • This lien must be filed within six months of the date you last performed work on the land. Wis. Stat. § 779.06.

  2. Lien Waivers: When making payments, you may want to obtain lien waivers from contractors and subcontractors. These waivers release the lien rights possessed by contractors upon payment.

What To Do If You Receive A Notice of Intent to File Lien or a Lien

  1. Determine if the Contractor or Subcontractor has a right to file a lien on your land. Consider the following:

    • Was the contractor or subcontractor required to provide a preliminary notice reserving their line rights?

      • (1) If yes, did they provide a preliminary notice?

    • Did the contractor serve a notice of intent to file a lien?

    • Did the contractor wait at least thirty days between serving notice of intent to file a lien and filing the lien?

    • Has more than six months elapsed since the date the contractor last performed work on the property?

          2. Consider talking to an attorney to determine if there are other defenses available to you.

Conclusion:

As a homeowner it is important to stay informed about construction liens. You can protect your property by checking for any liens on your property, especially before selling. Remember, a clear title ensures a smooth real estate transaction. If you have been served a notice of intent to file a lien or discover there is a lien on your land, please reach out to the legal professionals at West & Dunn online through our Contact Us page or by telephone at (608) 535-6420 for a free consultation.

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