Improvements or repairs to a home, condominium, or car take time, care, skill, and money. Contractors, subcontractors, and other workers spend a great deal of time and effort meeting an owner’s needs. Sometimes, property owners do not pay these skilled workers as promised, putting the worker’s livelihood and future in peril.
Perhaps you’ve heard of a mechanic’s lien as a potential remedy for a skilled worker or contractor who is not paid. You may understand that a property with more than one lien may make collecting the mechanic’s lien difficult. And may need to know does a mechanic’s lien override a bank loan or mortgage?
Below, the TonaLaw attorneys answer some common questions about New York’s lien law and discuss the answers to the question, does a mechanic’s lien override a title loan or mortgage? We also provide some information on liens on vehicles, or garage person’s liens, and how a mechanic’s lien on a financed vehicle works.
What Is a Mechanic’s Lien?
To understand whether a mechanic’s lien overrides a title loan or mortgage, you must first understand the basics of a mechanic’s lien. A mechanic’s lien is a lien that attaches to a property for unpaid work on that property. This means that, if the property is sold, a portion of the sales price must be used to satisfy a mechanic’s lien attached to the property. Typically, it’s used when a property owner doesn’t pay a contractor, but trades workers also use it to secure unpaid wages.
Who Can Get a Mechanic’s Lien?
Anyone who makes improvements on a property with the owner’s knowledge or consent can get a mechanic’s lien for unpaid work as long as they are licensed to perform the work in the county where the property is located, if the work requires a license. This includes:
- General contractors,
- Gardeners, and
Additionally, those who store or repair vehicles can get a lien for unpaid repairs on a car. This is called a garage person’s lien, and it attaches to the vehicle’s title.
How Does a Mechanic’s Lien Work?
A mechanic’s lien operates as any other lien on a property, like a mortgage or a title loan. Once it’s effective, it attaches to the property’s title and follows that property until it’s paid.
To be effective, the lien holder must file it with the county clerk’s office in the county where the property lies. The lien holder can then force the sale of the property in a foreclosure action to satisfy the lien. The mechanic’s lien is maintained for one year unless said mechanic’s lien is extended or a lawsuit to foreclose based on the lien is filed.
Other Mechanic’s Lien Requirements
You must file a mechanic’s lien with the county clerk within eight months of completing the work. In a single-family dwelling, you only have four months to file. When filing, you must provide all of the details of your work and the agreed-upon pay.
You don’t necessarily need a contract for a mechanic’s lien, although home improvements in New York do require a contract. If you’re in a profession that requires a license, then you must have a valid license within the county where work was performed to be eligible for a mechanic’s lien.
Does a Mechanic’s Lien Override a Bank Loan on Real Property?
Nearly every major purchase these days has a loan attached to it, and that is especially true when it comes to real estate. Typically, purchasers take out mortgages to buy real estate. A mortgage is a secured loan, which means it attaches to the property’s title as any other lien. The bank has a right to take and sell the property if the person doesn’t repay the mortgage.
People often wonder, If a piece of real property has multiple liens, mortgages, or loans, which lien is the priority? In other words, who gets paid if the property is sold or foreclosed by one of the lien holders or lenders? New York has a general rule that liens are paid in the order they are recorded with the county clerk. This is called the “first in time, first in right” rule.
For example, let’s say you file a mechanic’s lien with the county clerk on October 1, 2022. Then, you or another lien holder forces the sale of the property through foreclosure to satisfy the lien. Any liens or mortgages recorded before October 1, 2022, will be paid before your lien. But your lien would be paid before any liens recorded after that date. Essentially, when you file a lien on a real property, you are adding yourself to the end of the line to collect an amount of money.
Can You Obtain a Mechanic’s Lien on a Financed Vehicle?
Car repair shops and garages can get a type of mechanic’s lien on a financed vehicle or any vehicle for unpaid work or garage fees. This is generally called a garage person’s lien. To be eligible for a garage person’s lien, you must meet the following criteria:
- DMV-licensed shop–your shop or garage must be licensed with the New York State Department of Motor Vehicles;
- Consent–the owner of the vehicle must have given you consent to do the work on the vehicle
- Price–the vehicle owner must have agreed on the cost of repairs; and
- Possession–the repair shop or garage must have physical possession of the vehicle.
Once these conditions are met, the garage keeper can force the sale of the vehicle by auction after serving notice of the lien and sale on the car owner and bank or finance company.
Unlike a regular mechanic’s lien, you don’t need to file a garage person’s lien anywhere. Instead, it automatically becomes effective when someone doesn’t pay for the repairs to their vehicle or storage for their vehicle.
Once the repair shop gives notice of the lien, the finance company, bank, or vehicle owner can pay the lien and get the car back. However, the finance company, bank holding the title loan, or owner can challenge the validity of the repair shop’s lien. This involves litigation and often a hearing. You should consult with an attorney if you’re facing a fight over the validity of your lien.
Does a Mechanic’s Lien Override a Title Loan on a Car?
Cars and other vehicles often have other liens or loans. You may wonder, does a mechanic’s lien override a title loan on a vehicle? The answer is a bit complicated. Ultimately, the repair shop has a possessory lien on the car because they physically possess the vehicle. A possessory lien is generally considered stronger than a title loan and will be paid first by the owner or the bank, so long as it’s valid.
Contact Our Attorneys for a Mechanic’s Lien or Garage Person’s Lien
Getting a mechanic’s lien on a financed vehicle or mortgaged property may feel complicated. It involves dealing with banks and their white-shoe attorneys, and you may have to litigate your lien in court. You do not have to face this process alone. TonaLaw can help. Our business litigation attorneys will help you fight for your rights to your unpaid contract fees and labor. Contact one of our client-centered lawyers today.