How to File a Mechanic's Lien in Tennessee

A contractor, subcontractor, supplier or other individual or business that provides labor or materials to a construction project may file a mechanic's lien against a property owner. The lien claimant files this legal claim if they have not been paid for their work.

A mechanic's lien allows the claimant to place a hold on the property until they’re paid, or to sell it to recover money they are owed.

A mechanic's lien also applies to vehicles. Known as a garagekeeper's lien, this legal action allows a business that has repaired a vehicle to seize ownership of it if they have not been paid for the repair. The mechanic can sell the vehicle at auction to recoup the expense of the repair.

A mechanic's lien is a legal claim that a contractor, subcontractor, supplier or other individual or business that provides labor or materials to a construction project can file against the property if they have not been paid for their work.

The lien is essentially a way for a person or business to secure payment for the work they have already done. It allows them to place a hold on the property until they’re paid, or to sell the property in order to recover the money they are owed.

When filing a mechanic's lien, the person or business must follow specific procedures, according to the state they file in. These procedures typically involve serving notice on the property owner and on others involved in the construction project, and filing a lien with the court or an appropriate government agency.

If the property owner disputes the mechanic's lien, they may be able to have it removed or modified via legal proceedings. However, if the court finds that the mechanic's lien is valid, the property owner can be required to pay the amount owed in order to clear the lien and avoid further legal action.

Lien rights are the legal authority to file a mechanic's lien against a real property. If the vendor paid for the work or materials provided on a construction project, they can use the lien to force payment.

Lien rights help reduce financial risks for contractors, subcontractors, suppliers or other vendors that provide labor and materials to a construction project, as they are required to put up much of their own money in advance. If a vendor remains unpaid, they may enforce a foreclosure action and get payment from the sale of the property.

If a vendor is working on a government project, they'll make a payment bond claim, which is secured by a surety company. When a contractor goes unpaid on a government project, they can make a claim for payment against the bond.

In the Volunteer State, the parties who are entitled to file a mechanic's lien vary among contractors and subcontractors, depending on the type of project they're working on.

Those who have construction lien rights include contractors, laborers, equipment and material suppliers, and subcontractors. Designers, such as surveyors, architects and engineers also possess lien rights as long as they directly contract with the owner of the property.

On a residential, owner-occupied property with one to four units, only the prime contractor (and others who contract directly with the owner) have lien rights. If the owner is the project’s prime contractor on a residential property for a single family, laborers and suppliers under contract with the owner have lien rights. On these specific projects, designers do not have these rights.

There are different deadlines for filing a mechanic's lien, depending on the type of project that the claimant is working on. It also depends on whether the lien claimants are general contractors in direct contact with the property owner or are subcontractors who are not.

If the property owner files a Notice of Completion, contractors may have less time than they normally would to file a lien. This notice allows the property owner to reduce the risk of lien claims against the property. After a project’s completion, the owner or their agent can file a notice of completion with their local register of deeds.

Bonding around a mechanic's lien, also known as a bond to discharge a mechanic's lien, can vary depending on a number of factors, including the amount of the lien, the credit of the person or business seeking the bond, and the bond company's underwriting standards.

When a property owner gets a surety bond by which they promise to pay the contractor what they owe upon the court’s final determination, they can do what they wish with their real estate, as if there wasn't a contractor's lien.

For example, they can sell it or further expand upon an improvement project. If they fail to pay, the contractor can make a claim on the bond, and the surety company might then fulfill the claim of the property owner. The property owner will then repay the surety company.

The amount of a discharge of a mechanic’s lien bond will be at minimum 110 percent of the face value of the lien. For example, if a mechanic's lien is for $50,000, the amount of the bond is typically at least $55,000.

The bond’s price, or bond premium, is a percentage of the amount of the total bond. The percentage rate is usually between 1 percent and 15 percent. It is based on the property owner’s credit score and additional financial factors. This type of bond often requires full collateral from property owners.

Direct contractors must furnish a Notice to Owner to the property owner informing them that the project is about to commence. The potential claimant does not need to record the document, but must deliver it to the property owner by hand or via registered mail. Notice is required for all project participants on private construction projects.

Parties that do not contract directly with the owner, should send a Notice of Nonpayment before filing a lien. They must deliver it within 90 days of the last day of every month in which they provided labor and/or materials.

This notice can be sent by certified mail with return receipt requested or served in person with a sworn, notarized statement of delivery.

According to Tennessee lien law, when a mechanic's lien is expired, forfeited or satisfied, the claimant must file a lien release with the county Register of Deeds in the location of the property.

If the claimant does not cancel the lien within 30 days after receiving a written demand from the property owner, the lien claimant may be held liable for damages and costs, including reasonable attorney's fees, arising from the still-active lien.

A mechanic's lien is a legal claim against a property, not against a person – it typically does not directly affect an individual's credit score or their credit report.

However, if the mechanic's lien is not resolved, and the individual or business that filed the lien takes legal action to recover the unpaid amount, the resulting judgment could appear on the property owner’s credit report and have an adverse effect on their credit score.

If a property owner has received notice of a mechanic's lien filed against them, it is important to address the issue as soon as possible to avoid the possibility of legal action. Since 2018, the credit reporting companies Experian, TransUnion and EquiFax do not include mechanic's liens on personal credit reports.

A mechanic's lien is also known as a garagekeeper’s lien; it applies to the repair of vehicles. When a vehicle owner requests repairs but has not made payment for them within 30 days after the work is complete, a garagekeeper can recover the amount due by selling the vehicle to a third party.

To obtain a mechanic's lien in Tennessee, the garagekeeper should send to the Tennessee Department of Revenue, Vehicle Services Division, 500 Deaderick Street, 7th Floor, Nashville, TN 37242:

• Vehicle Information Request form.
• List of repairs on the business' letterhead.
  
• Applicable fees.

The garagekeeper must then send notice to the vehicle’s owner and to the vehicle’s lien holders or any other individual who claims interest in the car via registered mail, with a return receipt request.

If notice is delivered in person, the garagekeeper must obtain a notarized affidavit stating the identity of the person who delivered it. The notice must state:

• Time, place and manner of service.
• Full description of vehicle.
• Itemized list of repairs and specific payment not less than 10 days from delivery of the notice.
  

If the payment is not timely made, the garagekeeper can advertise the vehicle for sale at auction in a local newspaper where the repairs were made. They must schedule the sale at least 15 days from the time the advertisement appears.

If there is no newspaper available in the area, they must post the sale at least 10 days before the auction in a minimum of six clearly visible public places in the location of the vehicle’s sale.