The Ethics of Mechanic's Liens Part 1- Do You Mean I Don't Get Any Profit?

Title 29 Chapter 5 of the South Carolina Code sets forth the basis by which a contractor, subcontractor, material supplier or other persons improving real estate may file a lien on property for which they performed labor or provided materials. It is important for a contractor and the owner to understand that the lien (and any subsequent action to foreclose on the lien) are separate and apart from the breach of contract case that usually accompanies it. A mechanic's lien is a security interest in property for the benefit of those who have supplied labor or materials that improve the property. Its purpose in part is protect the value of the labor and materials used to improve the property not just against the owner, but as to all other persons claiming a later security interest in the property, like a subsequent purchaser or bank issuing a mortgage.

When a contractor files a mechanic's lien on property where he has performed labor or provided materials he is required to file a sworn statement of account which details the basis for the lien. The accounting does not have to be perfect. In fact §29-5-100 states that "No inaccuracy in such statement relating to the property to be covered by the lien, if the property can be reasonably recognized, or in stating the amount due for labor or materials shall invalidate the proceedings, unless it appear that the person filing the certificate has wilfully and knowingly claimed more than is his due."

However, contractors should also keep in mind that mechanic's liens are meant to protect material and labor actually used in the construction and that generally, overhead costs and lost profits are not within the purview of the mechanic's lien statute unless the terms of the overhead and profit are embodied within a contract. Zepsa Const., Inc v. Randazzo, 357 S.C. 32 591 S.E.2d29 (2003)

So this means that while a contractor may have a contract that says he is entitled to the payment of a certain sum of money, the amount he is actually able to lien may be substantially less. While the "retail value" of the services or material you provided may be more than what it actually cost you to perform the work, a lien is meant to protect the actual investment you have in the property; that is your actual costs. So when completing your statement of account, it is best to do a true accounting of the material and labor used on the job, not just the difference between what the contract says and what you have been paid. And for goodness sake, do not estimate or guess. There is still legal recourse to collect your other damages such as overhead and profit through a breach of contract action. But that may be separate from your lien.

For over 50 years, Finkel Law Firm LLC has represented individuals and businesses in construction and mechanic's lien cases. If you require legal assistance involving construction or mechanic's liens, please do not hesitate to contact the Finkel Law Firm.

*Any results the law firm may have achieved in past cases do not imply or indicate that similar results may be had in your case. Outcome of litigation is dependent on many factual and legal circumstances that may differ in your particular case.