Construction Lien – Definition

Cite this article as:"Construction Lien – Definition," in The Business Professor, updated September 24, 2019, last accessed August 4, 2020, https://thebusinessprofessor.com/lesson/construction-lien-definition/.

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Construction Lien Definition

A construction lien is a type of lien that protects builders, vendors, suppliers, contractors and other professionals from the risk of not being paid for their labor and materials supplied for a construction project. This lien is a claim that a contractor or any other professional make against a property when they are not duly paid.

A construction lien guarantees builders, contractors and other professionals their payment for services rendered and materials supplied. When professionals find it hard to get a property owner to make necessary payments, a construction lien can be used.

A Little More on What is a Construction Lien

In construction or building projects, default may occur, the owner of a property or the agent might fail to make payments to builders, contractors, suppliers and other professionals that work on the project. A construction lien protect these professionals from the risk of not receiving payments when due.

A construction lien is a legal claim against a property by suppliers, contractors and professionals who work on it. In certain cases, a property owner might refuse to pay contractors, builders and professional because he is not satisfied with the work done, this is not a justification for non-payment and a construction lien can still be filed against such property. Depending on the nature of the construction, remedies for construction liens differ, different states also have different penalties for construction lien.

Construction Liens Face Different Rules in Local Jurisdictions

Different states treat construction liens in various ways, there are specific agencies or jurisdictions that handle the filing of a construction lien. There are also terms and procedures that must be followed when filing for a construction lien. The terms of filing a construction lien also depends on the nature of the construction, for instance, the procedures for personal property might be slightly different from that of real property.

When filing a construction lien, the contract that states the type of construction and the job needed to be done must be attached. The price agreed upon by the parties involved must also be attached. In a state like New York, contractors, builders, subcontractors and other professionals that partake in the construction project can file a construction lien.

A construction lien can be filed after the project has been completed or when it is underway. When filing a lien, the owner of the property is entitled to one copy which should be received 5 days  before the notice of lien is served or 30 days after. In New Jersey however, construction liens can be filed 90 days after the services were rendered and materials provided. There are also certain conditions that can affect a construction lien, these conditions are clearly outlined in the laws of different states.

Reference for “Construction Lien”

https://www.investopedia.com/terms/c/construction-lien.asp

https://www.hg.org/legal…/understanding-and-avoiding-construction-liens-31037

www.businessdictionary.com/definition/construction-lien.html

https://realestate.findlaw.com/owning-a-home/contractor-s-liens.html

https://constructionliens.uslegal.com/

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