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Indiana Department of Financial Institutions

DFI > Education > Education Information > Credit Information > Home Equity Mortgages > Understanding a Mechanic's Lien Understanding a Mechanic's Lien

You are a homeowner; you do not necessarily understand (or care) about matters of real estate or construction law. But you've recently built your home, remodeled or added on and now you've received this document with a bunch of legal "mumbo-jumbo" called a "Notice of Intent to Hold Mechanic's Lien," "Pre-Lien Notice," Notice of Lien Rights," or some other document or letter to that effect.

What is it? What does it mean?

First, a mechanic's lien is a claim by someone (a person or a business) who performs construction work on your property. What constitutes work for which a mechanic's lien can be imposed is defined by a statute and case law in Indiana. Generally speaking, it would include any type of construction or remodeling work, including supplying materials for the people who do the work. Even landscaping services have been held to constitute "lienable improvements" to property. The key is whether the work improves the property.

A mechanic's lien is a claim against real estate which the person who asserts the claim says was benefited by improvements he or she made. This person will be referred to as the "lien claimant." By statute, the lien claimant must follow specific requirements in order to secure a valid mechanic's lien against your real estate. Unless he or she does so, the lien may not be enforceable.

The purpose of Indiana's mechanic's lien statute is to provide a lien claimant with a remedy for payment for labor or materials furnished to the property. Courts in Indiana have held that the mechanic's lien statute is intended "to promote justice and honesty, and to prevent the inequity of an owner enjoying the fruits of the labor and materials furnished by others, without recompense." What this means is that, if the proper steps are taken, the lien claimant may be able to recover the value of the services, labor and materials he or she provided to your real estate by initiating an action to foreclose against your property. The claim itself is not one of personal liability against you, but is against your real estate. No doubt, you are not terribly concerned with this distinction because you don't want to lose your house or be responsible for paying a worker so that you do not lose your house to a foreclosure action.

What should I do?

There are a few simple things you can do once you receive the document that purports to give notice of the mechanic's lien. If the lien claimant did not specifically follow the requirements of the statute, the lien will be of no effect. Look at the date it was recorded (usually a file-stamp" bearing the emblem of the recorder of the county where you live). What is the date? On residential property, in order to constitute a valid lien, the lien claimant must record the lien notice within usually 60 to 90 days of the date he or she last performed work or supplied materials to your property. You may or may not know this date. You may or may not know who the lien claimant is if it is not the contractor with whom you had a contract, but is one of his or her subcontractors. However, if you can determine the date of last work, you will be able to tell whether the lien claimant complied with the requirement of your particular state's statute.

In addition, work performed on a single or double family dwelling occupied by the owner of the property at the time the work is performed can be subject to a special requirement knows as a "pre-lien notice." If the work is for original construction and the lien claimant is a subcontractor to your contractor, the lien claimant serves a pre-lien notice on you within usually 60 to 90 days from the date he or she first performed his or her work. If the work to be provided is for remodeling, the pre-lien notice is served to you within usually 60 to 90 days after the first performance of work. Again, this is a pre-condition that the law may require. If the lien claimant does not comply, his or her later attempt to record a mechanic's lien may be invalid.

Note, however, a pre-lien notice is only required of a lien claimant who does not have a direct contract with you, the owner of the property. With these legal requirements in mind, you may avoid the possible expense and hassle if the lien claimant fails to comply. But let's not assume that is the case.

If you receive a mechanic's lien notice from anyone other than the person or business with whom you have a contract; i.e., your general contractor, contract your your general contractor immediately. The reason you received the notice is that a subcontractor, sub-subcontractor or supplier to your general contractor or to one of the subcontractors claims to not have been paid for work or material provided. You should immediately obtain assurance from your general contractor that they will see to it payment is made and the lien is released.

Caution: Even if you believe you have a good relationship with your general contractor, after making him or her aware of the lien claim and demanding that he/she rectify it, you should, within a reasonable time, contact an attorney qualified to handle construction lien cases.

If you receive a mechanic's lien notice from the party you had a contract with, you may wish to contact them to determine the basis for their claim (which you might already know), but you should most certainly, again, contact a qualified attorney. In this case, the dispute between you and your contractor has probably already reached a point where you are well aware of why they say you owe them money and why you believe you do not. Qualified legal advice is invaluable at this point.

What to do About Bad Improvements

You hired a contractor to put on a new roof. He finished and has been paid and your roof is leaking like a sieve. Your calls go unanswered. What do you do?

If you have contacted the Better Business Bureau and if mediation service is unable to help you, or you contacted your State's Attorney General regarding a deceptive sales practices violation, you may take up the matter in Small Claims Court if the amount of your dispute is usually $6,000 or less. By completing a Notice of Claim available at the Township Governmental Center and paying usually around $45.00, you can have your dispute settled by a Judge.

So how does it work? The Notice of Claim will be served on the roofer and he will be ordered to appear. At the first hearing, the roofer will be offered the choice of admit or deny the claim. If he admits the claim, he pays for the damages. If he denies the claim, the matter will be set for a hearing.

You don't need an attorney to represent you in Small Claims Court. So, how do you win? By being prepared. Start your presentation with a brief statement of the complaint: I paid for my roof, and it was not installed properly. Next, provide the conclusion of your argument: Because the contractor failed to install my roof correctly, I am entitled to the return of the money necessary to fix the roof so that it does not leak. Then start at the beginning and fill in relevant details about the hiring of this contractor and his faulty craftsmanship.

Whether the contractor is likable is not relevant to the outcome-stick to the facts involved in the complaint. Talk slowly. Make eye contact with the Judge. Bring any documentation that supports your story, including a copy of the contract, your canceled check, video or pictures of the leak, diagrams and the like. If you have to pay another contractor for repairs, bring that receipt. You are entitled to subpoena witnesses as well.

Remember the Judge cannot consider evidence not presented so be thorough in presenting your side of the story.

See Web Sits on Financing Home Improvements: