A lien refers to a claim to part of your house. Various parties can place liens on your house, including mortgage lenders, unpaid creditors and the tax authority. If a contractor works on your house and you fail to pay him, he may have the right to put a lien against your house.
Contractor's Right to Attach Lien
The contractor's right to attach a lien to a property protects his interests. If a client refuses to pay after a contractor finishes the job as previously agreed, the contractor can place a lien against the property to secure payment. The lien gives the contractor the ability to force the nonpaying client to sell the property and use the sale proceeds to pay off the debt. The client can remove the lien by paying the contractor.
The contractor only gains the ability to put a lien against a property once you sign a written contract promising to pay him. Additionally, the contractor also has to let you know before you sign the contract that he has the ability to put a lien against your house if you don't pay his bill. Without such a disclosure, the attempt to attach a lien to your house constitutes a deceptive practice, according to the law office of Alethea Rebman.
In a home improvement project, you probably have a contract with only the general contractor and not with other subcontractors working or providing materials for you. Although these subcontractors may not have a contract with you, they can place liens on your property for nonpayment for work or materials. They can do so even if you have paid the general contractor in full and the general contractor keeps the money for himself.
To protect yourself against liens from subcontractors without direct contracts with you, you have to obtain lien waivers. Ask for a list of subcontractors from the general contractor and keep track of their payments. Obtain a waiver of lien from every single subcontractor before you make your final payment to the general contractor. The waiver of lien contains the subcontractor's acknowledgement of full payment and his statement that he has no right to attach a lien to your house.