10 Most Common Mechanic’s Lien Exceptions

Updated October 5, 2023
11 min read
10 Most Common Mechanic's Lien Exceptions

Introduction

Mechanic's liens are crucial legal tools that protect the rights of suppliers, contractors, and subcontractors by allowing them to claim unpaid dues on properties they have worked on. However, several mechanic's lien exceptions may prevent a lien from being imposed or otherwise affect its validity. Understanding these exceptions can be pivotal in navigating the legal waters of construction claims.

1. Priorities Over Mechanic's Liens

The priority of a mechanic's lien — its rank amid other claims against a property — is a crucial factor. Typically, mechanic's liens are based on a "first in time, first in right" rule, implying the earliest liens have priority. However, exceptions exist, such as in the case of mortgage lenders, who often have priority over mechanic liens, even when filed later.

2. Residential Property Limitations

Mechanic's lien exceptions frequently depend on the classification of a property. The rules applying to residential properties have unique intricacies. 

Owner-occupied properties

Owner-occupied properties bring about distinctive mechanic's lien exceptions. To enforce a mechanic's lien effectively, the following conditions must be met:

  • A written contract must be established before the commencement of the work. This requirement showcases the importance of well-documented agreements in protecting a contractor's right to secure payment for services rendered.

  • The claim does not stand if the contractual agreement was solely verbal. This exception sometimes creates a challenge, as verbal agreements in owner-occupied properties often lack the legal solidity to warrant enforcement of mechanic's liens.

Non-owner-occupied properties

Contrarily, mechanic's lien exceptions applied to non-owner-occupied properties are usually less restrictive. This relative leniency may make it easier for contractors or subcontractors to place a lien. However, it's crucial to consider the following:

  • Specific state laws may introduce exceptions on the title of mechanic liens, altering how liens are enforced or whether they are relevant at all. Hence, conducting diligent legal research per the state's laws is essential.

  • The relationship between the non-owner occupant and the owner could also influence the successful placement and enforcement of liens. Understanding these dynamics can be integral in navigating mechanic's liens in the context of non-owner-occupied properties.

3. Homestead Ownership Exemptions

Several states, in compliance with U.S. law, provide provisions for homestead exemptions as a part of exceptions on title of mechanic liens. These exemptions effectively protect a portion of a homeowner's property value from creditors, including those who wish to impose mechanic's liens.

One such law that dictates this exemption is the Florida Homestead Exemption, which offers a substantial level of property protection from creditors. For instance, in accordance with this law, Florida's Constitution protects the entire value of a primary residence (up to half an acre in a municipality or 160 acres elsewhere) from forced sale by general creditors. Therefore, mechanic's lien exceptions, such as homestead ownership exemptions, predominantly seek to preserve the residential stability of homeowners. 

However, on the flip side, this represents challenges to lien claimants' ability to recover their full dues because the exempted portion of the homestead property falls outside the grip of their mechanic's liens.

4. Payment Bonds and Release of Lien

A significant avenue through which mechanic's lien exceptions occur is through the use of payment bonds and the release of lien documents. Under certain circumstances, prime contractors can offer payment bonds as a form of security to counter possible mechanic's liens. The existence of a payment bond means that the contractor has arranged an alternative payment method to directly compensate suppliers or subcontractors, rendering a lien unnecessary. Concurrently, signing a release of lien document involves voluntarily giving up the right to enforce a mechanic's lien. 

5. Lien Waivers

Lien waivers serve as another point on the list of regular mechanic's lien exceptions. There are instances when contractors, suppliers, or subcontractors are obliged to sign lien waivers as part of the project agreement. By signing lien waivers, these parties knowingly relinquish their rights to make a future lien claim for the provided work or materials. This practice, even though it impacts the rights of potential lien claimants, is a prevalent mechanic's lien exception, primarily in payment processes attached to the construction sector. 

6. Improper Filing and Mistakes

An integral mechanic's lien exception revolves around the filing process itself. Aced precision and attention to detail play a pivotal role in successfully filing a lien. Yet, certain mistakes can lead to mechanic's lien exceptions, invalidating any claims made. These mistakes often include:

  1. Errors in the mechanic's lien form: Any inaccuracies or misinformation in the form can render it void. For instance, incorrect property details or misrepresentation of the claim amount may lead to exceptions. 

  2. Misidentification of property: Applying a lien to the wrong property due to misidentification can not only invalidate the lien but may also expose the claimant to legal consequences.

  3. Missed filing deadlines: Every state has a specific timeline within which a mechanic's lien must be filed. Missing these deadlines can result in mechanic's lien exceptions.

To forestall these impediments, comprehensive understanding and utmost accuracy in drafting and filing liens are essential.

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7. Substantial Change in Project Scope

One of the many mechanic's lien exceptions involves substantial changes in project scope after the initial contract is signed. Any significant modifications to the scope of work that weren't part of the original agreement may exempt the extra work from being liable to a mechanic's lien. However, these changes must be treated as separate contracts, and if lacking a formal amendment to the original contract, these alterations may lead to mechanic's lien exceptions.   

8. Invalid or Extraneous Claims

The precision of claims under a mechanic's lien plays a vital role. All claims must be valid, accurate, and directly linked to the work performed or materials provided. Mechanic's lien exceptions apply to cases where claims are invalid — work not performed, exaggerated claims, or claims unrelated to the property improvement. 

9. Public Project Liens

Public properties present unique challenges due to mechanic's lien exceptions. Publicly owned projects are generally immune from mechanic's liens, shielding public funds from being directly claimed by contractors. Thus, contractors cannot enforce mechanic's liens against public entities. They can, however, file a claim against a payment bond as per the Little Miller Act claim, making it an alternative route for recovery in public projects.

10. Lien Stripping in Bankruptcy

The interplay of bankruptcy proceedings and mechanic's liens is intricate. A case of bankruptcy might lead to a mechanic's lien being stripped off property, a process called lien stripping. Understanding this mechanic's lien exception is crucial as the impact of bankruptcy on mechanic's liens can be complex. 

Conclusion

Mechanic's liens are powerful tools in securing payment rights in the construction industry. Nevertheless, understanding the myriad of mechanic's lien exceptions is vital to enforcing liens effectively. With Lawrina, a reliable legal tech ecosystem, you can access crucial business templates and skilled business law professionals to guide you through these legal intricacies.

Article by
Alina Kalyna
Lawrina

Alina Kalyna is the Content Specialist at Lawrina. With her experience in content creation, Alina is adept at producing comprehensive and engaging content across various platforms. Her role at Lawrina involves generating high-quality content for the blog, guides, and other materials.

Frequently Asked Questions

What is a mechanic's lien?

A mechanic's lien is a legal tool that allows suppliers, contractors, or subcontractors to lodge a claim against a property where they have performed work or provided supplies but have not been sufficiently compensated. It's crucial to note that mechanic's lien exceptions may apply based on varying situations and jurisdictional requirements, and these can significantly influence the viability of such liens.

How can a mechanic's lien be removed?

There are several ways through which a mechanic's lien can be removed. Fulfilling the debt could encourage the claimant to willingly remove the lien, or a court judgment might order the lien's removal. 

 

In other cases, the lien might naturally expire based on stipulated statutory limitations. However, certain mechanic's lien exceptions may impact how these methods apply, and these exceptions could alter the process of lien removal.
 

How does bankruptcy impact a mechanic's lien?

Bankruptcy has a significant impact on a mechanic's lien, primarily through a legal procedure known as lien stripping. This process can potentially erase a lien under certain circumstances. Yet, it's important to bear in mind that mechanic's lien exceptions could come into play here, affecting how bankruptcy impacts a mechanic's lien.