A construction lien can turn what should be a straightforward property transaction into a nightmare. I’ve seen it happen more times than I can count. Construction liens give contractors, subcontractors, and suppliers the legal right to secure payment for work they’ve done or materials they’ve provided. When you’re trying to buy or sell property, an unresolved lien can delay your closing, rack up unexpected costs, or kill the deal completely. Understanding how these work matters.
What A Construction Lien Is
In Michigan, we call these construction liens or mechanic’s liens. They attach directly to the real property when someone who worked on improvements doesn’t get paid. The lien creates a legal claim against the property itself. Not just the owner who didn’t pay. Think about it this way: if a contractor renovates your kitchen and you don’t pay them, they can file a lien that essentially makes your property collateral for that unpaid work. The property becomes security for the debt. These liens pop up in different scenarios:
- A general contractor who didn’t get full payment for renovation work
- Subcontractors that the main contractor hired but never paid
- Suppliers who delivered materials
- Individual laborers who worked on the property
And the really important part? The lien stays with the property even when ownership changes. So if you’re buying a house and there’s a lien on it from work the previous owner had done, that’s now your problem to deal with. That’s exactly why discovering one during a title search stops everything in its tracks.
How Liens Affect Real Estate Transactions
Most purchase agreements require sellers to deliver what’s called “clear title” at closing. A construction lien clouds that title. Lenders won’t touch it. They’re not going to fund a mortgage when another creditor already has a claim against the property. Makes sense when you think about it from their perspective. This means you can’t complete the purchase until someone resolves the lien issue. For sellers, finding out about a lien late in the process means you’re scrambling. You might need to settle the debt quickly or negotiate paying it from your closing proceeds. It’s stressful, and it puts your entire sale at risk.
Buyers face a different headache. You’re stuck waiting while the seller tries to fix the problem. Depending on how complicated things get, you might be waiting weeks or even months. Sometimes you just walk away. According to Michigan’s Construction Lien Act, property owners have specific rights and obligations when dealing with these claims. A Troy real estate lawyer can walk you through how the law applies to your particular situation and what your options actually are.
Steps to Resolve Construction Liens
Let’s say you’re selling and you just found out there’s a lien on your property. First thing: verify if it’s actually valid. Not every lien that gets filed is legitimate. Some are filed incorrectly. Others are past their expiration date. Some are based on work that’s genuinely in dispute. Don’t just assume it’s enforceable, but if it is valid, you’ll typically need to pay it before closing. You’ve got options:
- Pay the lienholder directly and get a release
- Try negotiating a settlement for less than what they’re claiming
- Pay it from your sale proceeds at closing
- Dispute it in court if you think it shouldn’t have been filed
If you’re the buyer dealing with an existing lien, sometimes you can negotiate. Maybe the seller reduces the purchase price by the lien amount. Another approach is requiring the seller to put money in escrow at closing to cover the lien while they sort it out. This way, you’re protected, and they get a bit more time to resolve things.
Protecting Yourself During a Transaction
Title insurance is where this starts. A good title search should catch any recorded liens before you get to closing. But you need to actually read that title commitment when you get it. Ask questions about anything that looks off. Buyers should think about requesting lien waivers from anyone who’s done recent work on the property. These are simple documents confirming that contractors and suppliers got paid and won’t be filing liens down the road. It’s a small step that prevents huge problems.
If you’re selling, keep records. All of them. Construction work, payments you made, and final releases you received. When you hire contractors for improvements, get those lien waivers before you list the property. Your future buyer will appreciate it, and you won’t get blindsided at closing. At Gudeman & Associates, P.C., we help clients work through construction lien matters and other title issues that come up during property transactions. Acting quickly keeps your deal moving and prevents the kind of expensive delays that happen when problems sit unresolved.
Get Professional Guidance
Construction lien problems need careful attention. Whether you’re buying or selling, working with a Troy real estate lawyer means you can spot potential issues early and figure out the best way to handle them. You really don’t want to be making these decisions on your own when there’s this much money involved. Contact us today.
