What is a Mechanic's Lien?

A mechanic's lien is a security interest in property for the protection of those who have supplied labor or materials that improve the property. A mechanic's lien is a legal remedy that secures payment for labor performed or materials furnished.

Mechanic's liens can be used to ensure payment of debts related to real property (such as land or real estate) and personal property (such as an automobile or equipment). A mechanic's lien can go by different names, such as construction lien (for constructing real property), materialman's lien (for those supplying materials), laborer's lien (for those supplying labor), design professional's lien (for architects or designers), or artisan's lien (for liens against personal property).

The right to file a mechanic's lien is granted by state law. Therefore, requirements for establishing, filing, and enforcing claims vary from state to state.

ASSUMPTION OF THE MORTGAGE vs. SUBJECT TO THE MORTGAGE

A homeowner may transfer property to someone else by sale, by gift, or by will. If the home has a mortgage, is the transferee liable for that mortgage? This depends on whether the transferee “assumes” the mortgage or the transferee takes the property “subject to” the mortgage.

If the transferee takes the property subject to the mortgage, the transferee is NOT personally liable for the mortgage. The original transferor remains personally liable, even if the transferee is now making the mortgage payments. Of course, if the transferee stops making the mortgage payments and defaults, the lender can foreclose and the transferee loses the house. But the lender cannot take legal action directly against the transferee.

If the transferee assumes the mortgage, the transferee and the original transferor are both personally liable for the mortgage. If the mortgage payments stop, the lender can foreclose and sell the property, and if the proceeds from the sale are not enough to cover the amount of the mortgage, the lender may take legal action against either the transferee or the original transferor. Generally, the original transferor cannot escape liability unless the transferor, transferee, and lender all agree to completely release the transferor from liability (this is known as a “novation”).

Can you assign a lease?

If a tenant no longer wishes to continue their lease, one option is to do an assignment. An assignment of a lease is a transfer of the remaining rights and obligations in a lease from one tenant to a new tenant. The old tenant is called the "assignor" and the new tenant is the "assignee."

Generally, the lease will say whether or not an assignment is permitted. If not, state law determines whether the tenant can do an assignment. For example, under Texas law, if the lease does not provide otherwise, an assignment requires the prior consent of the landlord.

Even if the lease prohibits assignments, the landlord may waive this restriction and allow the tenant to assign the lease. The landlord's waiver may be express (i.e. by the landlord's own words allowing the assignment) or implied (i.e. by the landlord's conduct, such as accepting rent from the assignee).

Note that an assignor is NOT released from contract obligations merely by assigning the lease to another. The assignor remains liable under the original lease contract unless the landlord expressly agrees to release the assignor from further liability under the lease contract.