What is Lien?

Definition of Lien in Construction
A legal document that is initiated to place a claim on a piece of property or structure.

A lien is normally placed on a construction project, due to lack of payment from the owner, to a contractor, subcontractor, supplier, architect, engineer or any other party that is owed money and the money has not been paid. In most states, a lien can be placed on a project within 90 days of the last work or delivery of material on that project. If the 90 days is exceeded, lien rights are normally legally waived. The placement of a lien on a project is in most cases a last ditch effort to obtain money. Once the lien is placed, the owner or party that owes the money, can bond the lien in an effort to nullify its affect on the project.

Open liens that have not been either paid off or bonded can cause difficulties when selling or refinancing the project. Liens on construction projects are common place and have become increasingly necessary to secure payment. In some instances, a contractor will place a total lien on the project prior to commencing work. The lien value is reduced as the contractor is paid throughout the progression of the job.