How Can Mechanic’s Liens Affect a Real Estate Transaction?

 Posted on June 23, 2021 in Real Estate

During a residential real estate transaction, all encumbrances on the title of the property will need to be resolved before the transaction can be completed. These encumbrances may include liens by creditors seeking repayment from the homeowner, such as mechanic’s liens. Those planning to sell their home will need to determine how to address any mechanic’s liens and resolve these issues to ensure that they can complete the sale successfully.

What Is a Mechanic’s Lien?

A mechanic’s lien allows a contractor or supplier who performed repairs or made improvements to a home to collect payment for any unpaid work. While homeowners will usually be able to resolve any payment issues with a general contractor, subcontractors or suppliers who were not paid by the primary contractor may also use mechanic’s liens to collect the payments they are owed. 

Requirements for Mechanic’s Liens in Illinois

Illinois law requires subcontractors or suppliers contributing to work on a single-family home to provide a preliminary notice to the homeowner within 60 days after work on the property has begun. This notice is necessary to establish the right to pursue a mechanic’s lien if payment is not received. A Notice of Intent to Lien must also be filed within 90 days after labor was last performed by a subcontractor or materials were furnished by a supplier. 

If a mechanic’s lien is filed within four months after work was completed, it will not only apply to the current owners of the property, but also to any subsequent owners. Mechanic’s liens that were filed after four months but within two years after the project’s completion will only apply to the current homeowners. The holder of a mechanic’s lien must take legal action to enforce the lien within two years after work was completed.

Releasing Mechanic’s Liens

Any valid mechanic’s liens will need to be released before ownership of the property can be transferred in a real estate transaction. Typically, liens will be released when the lienholder receives payment, after which they will sign a lien release form and a lien waiver. If the homeowner is not able to pay the full amount of the lien, they may negotiate a lower payment with the lienholder, or they may make other arrangements, such as creating a payment plan or agreeing that payment will be made once the transaction is completed. If a lien is invalid or fraudulent, a homeowner may file a petition in court asking for the lien to be vacated.

Contact Our Waukegan Residential Real Estate Attorneys

During a residential real estate transaction, the attorneys of Newland & Newland, LLP can perform a title search to identify any liens or other encumbrances that may affect the sale of a property. We will work with you to resolve these issues and ensure that the sale of your home can go through. To get the legal help you need with real estate matters, contact our Lake County real estate lawyers today at 847-549-0000 and arrange a free consultation.

Sources:

https://www.millionacres.com/real-estate-basics/real-estate-terms/what-mechanics-lien/

https://www.levelset.com/mechanics-lien/illinois-lien-law-faqs/