Find Me Funders
Mechanic's lien
Also called construction lien, materialman's lien.
A statutory claim against real property filed by a contractor or supplier who was not paid, which can outrank other creditors and is why construction receivables are financed differently.
Drafted with AI assistance and checked by a person. Its factual claims were verified against the sources listed at the end, by Find Me Funders research desk.
What it means
Every state gives unpaid contractors, subcontractors and material suppliers a right to attach a claim to the property they improved. The deadlines, the preliminary notice requirements and the priority rules are set by state statute and differ substantially from state to state, including whether the lien relates back to the start of work and therefore jumps ahead of a mortgage recorded later.
For funders this matters in two directions. A lender taking real property as collateral is exposed to liens that may prime its mortgage. A factor buying construction receivables faces a different problem: the invoice is entangled with lien rights, retainage, pay-when-paid clauses and lien waivers that the general contractor will demand before releasing payment.
That is why many factors either decline construction entirely or run a specialist program with its own documentation - conditional and unconditional waiver tracking, joint check agreements, and progress-billing verification. A construction receivable is not a normal receivable and does not get normal advance rates.
Where this one catches people
Signing an unconditional lien waiver in exchange for a payment that has not cleared gives up the lien while the money is still theoretically reversible. Conditional and unconditional waivers are different instruments, the forms are prescribed by statute in several states, and the distinction is the whole protection.
Where you will meet this term
Read next
Sources and checks
Every figure on this page traces to a document someone read, on a date. Where a check is past its review date it says so rather than passing as current.
-
State statutes give unpaid contractors, subcontractors, labourers and material suppliers a lien on the property they improved
definitionA lien is available to "A contractor, subcontractor, laborer, materialman, landscape gardener, nurseryman" upon "the real property improved or to be improved and upon such improvement" where the work was done "with the consent or at the request of the owner".
-
Priority rules differ by state; New York keys priority to what is recorded at the time the notice of lien is filed
definition"A lien for materials furnished or labor performed in the improvement of real property shall have priority over a conveyance, mortgage, judgment or other claim against such property not recorded, docketed or filed at the time of the filing of the notice of such lien"
-
In relation-back states the lien can outrank a mortgage recorded later, because priority runs from the commencement of work or first delivery of materials
definitionThe lien is prior to "any lien, mortgage, deed of trust, or other encumbrance which attached to the land after or was unrecorded at the time of commencement of labor or professional services or first delivery of materials or equipment by the lien claimant."
-
Lien waiver forms are prescribed by statute in several states, and an unconditional waiver binds the claimant even if payment never arrives
trap"The waiver and release given by any claimant is unenforceable unless it follows substantially the following forms"; the unconditional form carries the notice "This document is enforceable against you if you sign it, even if you have not been paid."
Mechanic's lien — common questions
What does mechanic's lien mean?
A statutory claim against real property filed by a contractor or supplier who was not paid, which can outrank other creditors and is why construction receivables are financed differently.
Where does mechanic's lien catch people out?
Signing an unconditional lien waiver in exchange for a payment that has not cleared gives up the lien while the money is still theoretically reversible. Conditional and unconditional waivers are different instruments, the forms are prescribed by statute in several states, and the distinction is the whole protection.
Is mechanic's lien the same as an interest rate?
Mechanic's lien is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does mechanic's lien apply to?
Invoice Financing, Asset-Based Lending.
Is there a worked example of mechanic's lien?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside mechanic's lien?
Invoice factoring, Notice of assignment, Perfection, Receivable, Retainage.
Has this definition been checked?
Yes. Its claims were verified against the sources listed at the end of this page, and the reviewer is named.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.