As part of real estate law, a lien provides a way for a contractor to hold the improved property legally hostage until the recipient of the services has paid for the work performed. With a lien filed, the property owner cannot sell the property or perform any further legal transactions on it until the lien is cleared (in other words, the bill is paid). In some cases, a lien can be used for force a sale of property to get the money owed. Liens are considered public records, so they will show up on a search signaling the property owner still owes money for work performed.
Stipulations and Priorities
In many states, real estate law does not distinguish between a subcontractor and contractor. As a result, a lien from a subcontractor has equal merit as that from the direct service provider. This kind of statutory stipulation in state laws basically puts the interior painter on the same footing legally as the plumber, the electrician and the firm that laid the cement for the property foundation.
Some states, such as Pennsylvania, allow homeowners and general contractors to file advance stipulations against liens. In these states, such a legal filing protects the property owner and general contractor from secondary and tertiary liens by subcontractors. These support-contract parties lose any ability to hold the property hostage for unpaid bills.
Under federal regulations, some federal agencies can also establish stipulations against liens. In such cases, the agency executive officer makes the decision for the stipulation to apply. The actual authority is limited to small contracts with values less than $2,500. In these agreements, the vendor agrees to the stipulation which then protects the federal agency's property for any subsequent lien.