Mechanic's Lien

A mechanic's lien is a sort of legal claim on a property by a person who performed work on that property. When a contractor performs work on a certain property, he has a reasonable expectation of being paid for his work. In some situations, though, funding will fall through or a property owner will run into financial trouble. If that property owner is unable to pay the people who performed work on the home, those individuals can file a mechanic's lien. Also called a construction lien, this becomes a security interest in the property. If the property is ever sold, the person who performed the work must be paid by the proceeds of that sale. The lien stays in effect until the person who improved the property is paid in full. Because mechanic's liens are security interests, the person holding the lien may have the ability to claim compensation even if the property owner goes into bankruptcy.