Mechanic’s lien
Also called construction lien
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is mechanic’s lien?
A mechanic’s lien is a legal claim against a property that a contractor or supplier can file when it isn’t paid for work or materials used to improve it. In the US, suppliers to private construction projects generally have lien rights, governed by state law.
How it works
To keep those rights, many states require a supplier to send a preliminary notice (names vary by state) to the owner and others within a set time of first delivering material, and deadlines and rules differ by state. Public property generally can’t be liened; suppliers instead claim against the contractor’s payment bond, and in some states against the project funds. When a supplier is paid, it signs a lien waiver for that amount: a conditional waiver, which takes effect only once the payment clears, before the money arrives, and an unconditional one only after it has.
Mechanic’s lien example
A distributor’s credit team sends a preliminary notice to the owner within days of the first delivery to a new apartment project. Each month, as the contractor pays, the team signs a lien waiver for the amount received.
Related terms
- Job accountA job account is a separate account a distributor opens for one construction project, so material for that job is tracked, billed and secured on its own.
- Credit limitA credit limit is the maximum unpaid balance a distributor allows a customer to carry on its account.
- Accounts receivable (AR)Accounts receivable (AR) is the money customers owe a company for goods already delivered and invoiced but not yet paid for.
