Tax lien laws were constituted as a means to protect labor subcontractors and providers from dishonest general contractors who could get full payment for all the services from the owner of the property. But neglect to compensate for the outside services or supplies he accosted to finish the task.
The tax lien law allows for an unpaid worker to pressure the home or landowner to pay for the services regardless of whether or not he has already compensated the contractor for the job that has been completed.
In the case that the homeowner declines to pay up for the services provided after the general contractor has neglected to pay for the invoices, the subcontractor can then put a tax lien on the said property to assure later payment should the specific property be mortgaged or sold. However, this is not an assurance of immediate payment, but does ensure that the landowner will never be able to attain a profit on the property without first paying up for the tax lien in full.
Tax lien laws variegate from state to state and should be thoroughly explored before seeking to place a tax lien on a particular property. Now, most states have rigorous timelines in reference to tax liens. So, it is most effective to file a tax lien right away even if you’re in talks with the homeowner concerning payments. Tax liens can be easily removed but can’t be imposed after the deadline, regardless what the circumstances might be.
One thing to be wary about when beginning at a fresh work place. Homeowners who realize their financial obligation when addressing with general contractors sometimes call for all subcontractors to sign tax lien releases before the work commencement. Or when making a final payment so as to free them of payment responsibility concerning subcontractors. Just keep in mind that if you sign this waiver, you can obtain payment through the general contractor – tax lien laws no longer apply then.
Tax lien laws are not automatic so that means there are processes the laborer must do. Although lien law rules may vary from area to area, one must be aware of the following:
*Tax lien laws differ often dramatically when managing private projects vs. public ones.
*Notify the homeowner that you’re acting on the project with a pre-lien form.
*Place a tax lien within specified deadlines.
The following are few safeguards every subcontractor should apply to assure that they are compensated in a timely manner and prepare to make suitable action when they aren’t:
*Keep pre-lien forms on file for fast access.
*When signing a work contract, send a decently filled out pre-lien form to the homeowner thru mail.
*Watch lien deadlines carefully to check that you are able to make a claim legally.
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