We are talking about mechanic’s liens and what a homeowner can do about a mechanic’s lien against his property. As we said, the liens are for construction work completed but not paid for. The construction firm or the subcontractor can put a lien — a legal “hold” — on the property until the debt is paid.

How to clear up a mechanic’s lien depends on who owes the money and who owns the home. There are times when the homeowner himself has failed to pay the bill, so he is on the hook.

So, the contractor records a lien for a certain amount of money — because these are usually big jobs, the debts can run to tens of thousands of dollars — while the homeowner still lives in the house. What would happen next?

If the homeowner pays off the lien, everything goes back to normal. The lien is removed, and the encumbrance on the home no longer exists.

If the homeowner does not pay, though, and enough time goes by, the lienholder may foreclose on the home. The mortgage would be paid first and the lien second. The homeowner would not only be out of his house, but he would hand over what could be a good portion of his equity in the home to the lienholder.

If the homeowner does not pay and decides to sell before the lienholder forecloses, the lien will show up (if recorded property) on a title search. Buyers generally shy away from deals with that kind of encumbrance unless the deal includes the assurance that the seller will pay the lienholder immediately. If the lien remains on the title, the lienholder could still demand payment or foreclose, even if the buyer had nothing to do with the original transaction.

We’ll finish this up in our next post.