Mechanic's Lien

DEFINITION of 'Mechanic's Lien'

A guarantee of payment to builders, contracters and construction firms that build or repair structures. Mechanic's liens also extend to suppliers of materials and subcontractors and cover building repairs as well. The lien ensures that the workmen are paid before anyone else in the event of liquidation.

A mechanic's lien is also known as "artisans' liens" or "materialmen's liens" .

BREAKING DOWN 'Mechanic's Lien'

Mechanic's liens are often necessary to secure construction help on a project. The lien stays in force until the project is finished and all constuction personnel have been paid.

From an investment standpoint, it is important to note that mechanic's liens generally have a higher priority than other forms of debt. This priority determines the hierarchy of claims in the event of foreclosure or repossession. Interestingly, mechanics liens were not named after automobile mechanics seeking payment for repair services. Instead, the term traces its roots back to the 18th century, when laborers were often referred to as "mechanics."