What constitutes a construction lien?

What constitutes a construction lien?

• A. A security interest in a property for unpaid debts
• B. A contract guaranteeing payment for construction work
• C. A bond issued to subcontractors
• D. A permit required for construction projects

Answer: (A)

A construction lien, also known as a mechanics lien, serves as a legal claim against a property to secure payment for work performed or materials supplied in the construction or improvement of that property. When a contractor, subcontractor, or supplier is not paid for their services or materials, they can file a construction lien to ensure they have a right to payment from the value of the property. This security interest remains attached to the property, allowing the lienholder to potentially recover the debt through a sale of the property if necessary. The other options do not accurately describe a construction lien. The contract guaranteeing payment for construction work pertains to legally binding agreements established before actual work begins, while a bond issued to subcontractors specifically relates to financial assurance that subcontractors will be paid, not a lien on the property itself. Lastly, a permit required for construction projects is a legal requirement to commence building but does not pertain to financial claims regarding unpaid debts. Thus, the definition of a construction lien as a security interest in a property for unpaid debts is the most accurate representation.

A construction lien, also known as a mechanics lien, serves as a legal claim against a property to secure payment for work performed or materials supplied in the construction or improvement of that property. When a contractor, subcontractor, or supplier is not paid for their services or materials, they can file a construction lien to ensure they have a right to payment from the value of the property. This security interest remains attached to the property, allowing the lienholder to potentially recover the debt through a sale of the property if necessary.

The other options do not accurately describe a construction lien. The contract guaranteeing payment for construction work pertains to legally binding agreements established before actual work begins, while a bond issued to subcontractors specifically relates to financial assurance that subcontractors will be paid, not a lien on the property itself. Lastly, a permit required for construction projects is a legal requirement to commence building but does not pertain to financial claims regarding unpaid debts. Thus, the definition of a construction lien as a security interest in a property for unpaid debts is the most accurate representation.