1. A homeowner hires a company to replace her roof and signs a contract. She refuses to pay $2,000 of the bill, insisting that the quality of the work was poor and the roofing company took much longer to finish the job than agreed upon. The homeowner receives a notice that the company intends to file a mechanic's lien against her property if she doesn't pay up.

History      Mechanic's lien laws in the United States can be traced back to Thomas Jefferson in 1791.     Colonial Americans needed homes and buildings to be erected but faced a shortage of materials and labor. Jefforson felt mechanic's liens would make it more attractive for contractors and builders to take on the risks of construction. If a landowner contracted with a "mechanic" or builder to improve his property and then failed to pay him, the mechanic could use the lien to collect the debt.

2. A contractor is hired by a couple to put in a new driveway. They agree on a total price of $12,000 and pay $6,000 before work starts and $6,000 when it is finished. The contracting company orders materials from a cement company on credit. The contractor then files for bankruptcy and the cement company places a mechanic's lien on the couple's property -- even though the $12,000 bill was paid in full. The couple is afraid they will have to pay for some of the materials twice.

3. A potential home buyer puts an offer on a house. Before the transaction gets to closing, the homeowner is informed there is an old mechanic's lien on the property. The title insurance company refuses to clear the title until the lien is satisfied or removed. That means the debt has to be paid off, the claimant filing the lien has to release it, or a court order has to remove it.

These cases illustrate the pitfalls involved in home improvement projects. A mechanic's lien (sometimes called a construction lien) gives a secured interest in a property to parties that have improved it with labor and materials.

A material supplier could include a lumber yard, an appliance company, a solar panel firm or a retailer of lighting fixtures.

Laws in every state provide mechanic's liens as a way to ensure contractors and material suppliers get paid. A claimant must file a lien within a certain amount of time with the government office that records deeds or land titles where the improved property is located.

A key factor in a mechanic's lien is that the property must be improved. In essence, the claimants are arguing that they own the improvements.

A mechanic's lien claimant may also be able to force the sale of a property in order to recover the amount owed from the proceeds. Until the debt is paid off, the owner does not have a clear title and it can prevent the property from being sold, refinanced or transferred. That's one reason why mechanic's liens are effective, powerful tools for contractors and suppliers to get paid.

There are some preventative measures that homeowners can take to protect themselves from mechanic's liens.

• Only hire licensed contractors and check the licenses of subcontractors hired by them. (Unlicensed contractors may not be able to foreclose on a lien if the work is over a certain dollar amount.)

• If you are having work done on your home, take some time to understand the mechanic's lien laws in your state.

• Make sure your contract identifies subcontractors and suppliers providing materials for the job. When possible, buy the materials yourself and pay for them.

• Keep copies of paperwork that workers give you. Some states must provide the property owner with a notice that they may need to file a lien. If they don't give the notice, they lose the right to file a lien.

• Pay with joint checks or separate checks to the contractor, subcontractor and others.

• Ask contractors for a "waiver of lien" form. It provides proof that contractors and suppliers have been paid and asks them to relinquish the right to place a lien on the property. Some states have a waiver after an initial payment and another waiver after a final payment. There may a form you can file with a local government office to provide notice that a project has been completed. These forms allow property owners to monitor the progress of a project.

What if a Mechanic's Lien Is Filed Against You?

You have three basic options if a mechanic's lien is filed against your property.

• Pay off the lien, which means you may wind up paying part or all of a home improvement bill twice. That is because you may have paid the contractor in full already, but now you may have to also pay the subcontractor or materials supplier that the contractor used. If you do this, make sure the contractor withdraws the lien filed and attempt to get a general release.
• Allow the property to be sold to satisfy the amount in dispute.
• Prove the lien is invalid. This may involve taking action in court.

Contact your attorney immediately to determine if the lien is valid. The claimant may not have met the strict required timelines and rules in your state for filing the lien. The statute of limitations may have expired or the contractor may have exaggerated the amount due. The mechanic's lien process can be complex and the procedures vary from state to state. There may be actions you can take to remove the lien or you may be able to petition a court for a decree to release the property from the lien.