Construction Lien Property: What Every Buyer and Seller Needs to Know

A construction lien on your property can stop a real estate closing in its tracks — here's what causes it and how to fix it.

If you're buying or selling real estate and a contractor, subcontractor, or supplier was never paid for work done on the property, you could face a lien — and a closing that won't proceed until it's resolved. Understanding construction lien priority is essential for anyone in a real estate transaction.

What Is Construction Lien Priority?

Lien priority determines who gets paid first if a property is sold or foreclosed. In most states, construction-related liens — also called mechanic's liens or materialman's liens — can "relate back" to the date work first began, not the date the lien was filed. This means a lien recorded after your mortgage could still outrank it.

4 Common Ways Lien Priority Breaks Down at Closing

• Construction began before the mortgage was recorded — giving material man, contractors and subcontractors, priority over the lender.
• Unpaid subcontractors on a newly built home file liens the buyer never knew about.
• The seller failed to record a notice of completion, leaving the lien filing window open.
• Recording errors or gaps in the chain of title create disputed priority positions.

How It Disrupts the Closing Cycle

When a title examiner flags a construction lien — or evidence that work occurred without confirmed payment — the title insurer will typically refuse to issue a clean policy. Without title insurance, lenders won't fund. The result: delays, renegotiations, escrow holdbacks, or a failed transaction.

How to Resolve a Construction Lien Before Closing – Additional Work and Costs



While the below are all valid ways to potentially "work around" a lien and/or broken priority, they are requiring additional and often uncontemplated work and can include unanticipated costs, including getting lien waiver, paying the lienholder, securing a surety bond, and/or negotiated an indemnity (when backed by sufficient assets).

To learn more or to schedule a consultation, contact Joseph R. Marriott at jospeh@snw.law or by telephone at (504)324-1886.