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Imagine you get a contract to work on a site. You invest good deal of money into the work. All your labors have worked hard, day and night to make sure that the work is completed in time and then once the work is completed, you get to know that the company who has given you the work can no longer afford to pay you. That will come as a lightning bolt out of a clear sky. You may wonder how all of a sudden he does not have any money to pay you and what you have now to protect your interest. To be frank, you got nothing to protect your interest. You have to pay your workers for their labor and you get nothing out of this entire deal. On the contrary, you just end up spending all you have.

Well, this is not how things work in the construction industry. When you take up a work, you make sure that you get the payment regularly. However, before that, you have your lien on the property so that in case the project owner is unable to pay you, he can’t use the property and you can sell it off to any financial institution or do whatever to claim your money back.

Now take the same example other way round. Let’s say that you have taken the contract and you sub contract it to a third party. For some unfortunate reasons, you are unable to pay the sub contractor his dues. This will result him in placing a lien on the said property. Therefore, it is believed that placing a lien on the property is perhaps the only method by which you can secure your payments.

Placing a lien can have serious implications once it is placed on any given property. The first major implication will be banks or any financial institution will lend money to refinance the property. Banks want them to be having first lien if they are giving any loan on an existing property. So if there is already a lien on the property, you cease any scope of getting loans from bank. Not only this, you credit rating also takes a beating. This has a huge impact on your borrowings.

It has also been witnessed that some contractors fraudulently place liens on a property even though they have received all the payments. This is a serious issue and is also dealt stringently by the forces. However, you have to go through lot of hassles till the time it is not proven that the money is paid to the contractor. Work at other jobsites is also stopped as contractors fear that they will not get paid for their work. It is crucial that you scan the contractors well by checking their work history and then give work.

Liens on property can have damaging impact even if it is fraudulently put on you. Therefore, always ensure that you pay your contractors well in time so that they do not impose a lien on the given property.

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