Are you wondering what a lien is and why they are needed during the construction of your new home?
You’re not alone.
The lien process can be confusing when you don’t know how it works, but it’s important to understand it before the construction of your new home begins. Put simply, the lien process is there to protect the rights of the subcontractors and material suppliers that work on the construction of your new home.
Phase 1: The Preliminary Notice
The first phase of the lien process is the Preliminary Notice. The Preliminary Notice is an introductory letter that is sent to you by the subcontractors and material suppliers that will be working on your home.
The notice is to let you know who they are and what they will be working on or supplying. This is a formality so subcontractors and suppliers can claim their right to file a lien claim on your home, should they not be paid.
This is not something you need to be concerned about if you’re working with a professional licensed builder. Professional builders only hire licensed subcontractors and have a payment schedule in place to ensure each subcontractor and supplier is paid as required when each phase of your new home is completed.
Which leads to the next phase of the process, Lien Releases.
Phase 2: Lien Releases
A Lien Release is issued after the subcontractor or supplier has been paid. This process releases the subcontractor or supplier’s right to lien the property as their portion of the work has been paid for.
For each Preliminary Notice you receive, you will also receive a Lien Release from the same subcontractors and suppliers to serve as a notice of payment and an unconditional release of their right to lien your home.
Phase 3: Notice of Completion
The final step of the lien process is the Notice of Completion.
This notice is filed with the county’s recorder’s office once the work on your new home has been completed. It decreases the time that a subcontractor or supplier has to record a claim, now that the work has been completed.
Make Sure You Choose The Right Builder
For you, the most important part of the lien process is to make the right choice when choosing your builder. Your builder should be licensed, someone you can trust, and someone who only hires licensed subcontractors. Ask your builder about the subcontractors and suppliers they use and the process they use for their payment schedule to pay them.
When you do this, you can be confident your builder has a systemized process that will prevent any subcontractor or supplier from ever needing to make a lien claim on your home.
The information I’ve covered here is just a small sample of what I can to share with you to ensure you are well informed when you start designing and building your new home.
If you’re just starting the process you can download our free guide, the 7 Things You Must Know Before Designing A New Home to help you to keep your design on budget and avoid any nasty surprises that can sneak up on you when building a custom home.