CC Contract Law and Lien Rights 1 — Questions and Answers
Question 1: What is a mechanics lien?
- A legal claim against a property for unpaid construction work or materials (Correct answer)
- A type of vehicle tax
- A surety bond requirement
- A permit for heavy equipment
Correct answer: A legal claim against a property for unpaid construction work or materials
A mechanics lien is a security interest placed on a property to ensure contractors, subcontractors, and suppliers can be paid for their services.
Question 2: Which of the following is typically required before a contractor can file a mechanics lien?
- Serving a preliminary notice to the property owner (Correct answer)
- Filing a police report
- Obtaining a new contractor license
- Getting a building permit
Correct answer: Serving a preliminary notice to the property owner
Most states require a preliminary notice (also called a pre-lien notice) to be sent to the property owner within a set timeframe as a prerequisite to lien rights.
Question 3: What does 'prompt payment' legislation require of general contractors regarding subcontractors?
- Subcontractors must be paid within a set number of days after the GC receives payment (Correct answer)
- Subcontractors must be paid before the project starts
- Payment must be made in cash only
- GCs must pay subcontractors before receiving payment from the owner
Correct answer: Subcontractors must be paid within a set number of days after the GC receives payment
Prompt payment laws establish mandatory timelines for passing funds down the payment chain from owner to GC to subcontractor.
Question 4: A 'lien waiver' is signed by a contractor to:
- Release their right to file a mechanics lien upon receipt of payment (Correct answer)
- Apply for a new license
- Extend the project deadline
- Transfer the contract to another party
Correct answer: Release their right to file a mechanics lien upon receipt of payment
A lien waiver is a document acknowledging receipt of payment and relinquishing the right to place a lien on the property for that amount.
Question 5: What is the 'statute of limitations' for filing a mechanics lien?
- A state-specific deadline by which a lien must be filed after project completion or last work date (Correct answer)
- A limit on the dollar amount of a lien
- A federal tax rule for contractors
- A building code provision
Correct answer: A state-specific deadline by which a lien must be filed after project completion or last work date
Each state sets a deadline (typically 60–120 days) from the last date of work within which a mechanics lien must be filed or the right is forfeited.
Question 6: Which clause in a contract states that a contractor cannot file a lien while awaiting dispute resolution?
- No-lien agreement or lien waiver clause (Correct answer)
- Force majeure clause
- Indemnification clause
- Liquidated damages clause
Correct answer: No-lien agreement or lien waiver clause
A no-lien agreement or advance lien waiver clause contractually restricts a party's ability to file a lien during or after the project.
CC Contract Law and Lien Rights 1
What is a mechanics lien?