Indemnity Agreement Mechanics Lien: What You Need to Know
An indemnity agreement mechanics lien is a legal contract that protects a property owner from any financial loss caused by a contractor, subcontractor, or supplier filing a mechanics lien against the property. A mechanics lien is a legal claim filed by a contractor, subcontractor, or supplier who hasn`t been paid for work or materials supplied on a construction project. A mechanics lien can result in the property being sold to satisfy the debt owed.
To protect themselves from this financial risk, property owners often require contractors, subcontractors, or suppliers to sign an indemnity agreement before starting work. This agreement requires the contractor, subcontractor, or supplier to indemnify (reimburse) the property owner for any damages or expenses the property owner incurs as a result of a mechanics lien filing.
The indemnity agreement typically covers all costs associated with the mechanics lien, including legal fees, court costs, and any settlement or judgment amount. The agreement may also require the contractor, subcontractor, or supplier to obtain a bond or other form of financial protection to cover the amount of any potential mechanics lien.
It`s important to note that an indemnity agreement is not a substitute for proper payment procedures. Property owners should still ensure that they are making timely payments to contractors, subcontractors, and suppliers as specified in their contracts. In addition, contractors, subcontractors, and suppliers should provide timely and accurate invoices and follow up on any unpaid amounts in a timely manner.
If a mechanics lien is filed against a property despite the existence of an indemnity agreement, the property owner should immediately notify their legal counsel and insurance provider. The indemnity agreement should be reviewed to determine the scope of coverage and any potential exclusions or limitations.
In conclusion, an indemnity agreement mechanics lien is an important legal contract that protects property owners from the financial risk posed by mechanics lien filings. Property owners should require contractors, subcontractors, and suppliers to sign an indemnity agreement before starting work and should continue to follow proper payment procedures to avoid mechanics lien filings altogether. If a mechanics lien is filed despite the existence of an indemnity agreement, property owners should seek legal counsel and notify their insurance provider.