The Lowdown On Tax Lien Laws
Lien laws were established as a way to protect labor subcontractors and suppliers
from unscrupulous general contractors who may receive payment in full for all
services from the property owner, but fail to pay for outside services or supplies
he solicited to complete the job.
The lien law allows an unpaid laborer to force
the home or property owner to pay for his services irregardless of whether or
not he has already paid the general contractor for the work that has been completed.
In the event the homeowner refuses to pay for services rendered after a general
contractor has failed to pay invoices, the subcontractor may then put a lien
on the property to ensure future payment should the property be sold or mortgaged.
It is not a guarantee of immediate payment, but does guarantee that the property
owner will never be able to make a profit on the property without first paying
the lien in full.
Lien laws vary from state to state and should be thoroughly researched before
attempting to place a lien on a specific property. However, most states have
stringent timelines in regards to liens, so it is best to file a lien as soon
as possible, even if you are in negotiations with the homeowner regarding payments.
Liens are easy to remove, but can not be levied past the deadline, no matter
what the circumstances.
Another thing to be careful about when starting work at a new job site: homeowners
who understand their liabilities when dealing with general contractors may require
all subcontractors to sign lien waivers prior to work commencement (or making
final payment), to release them of any payment responsibility regarding subcontractors.
If you sign this type of waiver, keep in mind that your only recourse in obtaining
payment is through the general contractor - lien laws no longer apply!
Lien laws are not automatic. There are things the laborer must do to enact
them. Although lien law regulations vary from area to area, here are a few basics
to be aware of:
- lien laws often differ dramatically when dealing with private projects vs.
public ones
- you must notify the homeowner that you are working on the project in the
first place with a pre-lien form
- you must place a lien within specified deadlines
Here are a few safeguards every subcontractor should practice to ensure that
they are paid in a timely manner, and ready to take appropriate action when
they aren't:
- keep a supply of pre-lien forms on file for fast accessibility
- whenever you sign a new work contract, send a properly filled out pre-lien
form to he homeowner via registered or certified mail
- watch your lien deadlines carefully to ensure that you can legally make
a claim
Liens are an effective way to force homeowners to choose reputable contractors
by making them liable for all subcontractors bills, regardless of what payments
may or may not have been made to the general contractor in charge.
Lien Waiver
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