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This presentation is about the mechanics lien
and it's going to aim to answer the question what is a mechanics lien?
Now there's a question inside of this question
that is really important to understanding what a mechanics lien actually is
and that question is: What is a lien?
When you look up a lien online, this is the definition that Wikipedia will provide you.
I'm a big fan of Wikipedia.
It's a really great definition; it says that a lien is a "security interest…
that is used to secure the payment of a debt."
People who aren't familiar with legal terms are going to be a little -
confused about what a security interest is
and so I'm going to give you a little bit of education on this.
Let's say this is your cousin Carl. He wants to borrow 10,000 bucks.
Now this guy like I put here in the slide, he can't comb his own hair
so you don't trust necessarily that he'll pay you back that $10,000.
But Carl does have a really sweet ride.
Now Carl can tell you something along the lines of
"Hey dude, I promise to pay you back. If I don't, you can have my sweet ride."
You give Carl the $10,000, Cark keeps his sweet ride, drives it around town
and he promises to give you his car if he doesn't pay you that $10,000 back.
Let's go back to this definition:
A lien is a form of security interest used to secure the payment of a debt.
What you've done is you've just created a security interest with Carl.
Now how do you get these security interests?
First, one way you can get these things is someone can agree to give it to you;
that's what would happen in the case of Carl; you agreed to give Carl $10,000
and in exchange he gave you an interest in his car that secures
his promise to pay you that $10,000.
Another way you can get a security interest is if the law gives it to you,
automatically without any formal agreement.
That's exactly what happens in the case of a mechanics lien.
If you look at the definition of a mechanics lien that's provided by Wikipedia again,
it mentions that term 'security interest' because that is exactly what this is.
A mechanics lien is a security interest in the property where you're doing construction work
and it is given by law automatically without a formal agreement
to anyone who supplied labor or provided materials
that actually improved the property that is being used to secure the debt.
Why? Why is this the case?
Thomas Jefferson actually introduced the first mechanics lien legislation in the Maryland legislature;
and the reason why he did it was he wanted to build the Washington DC area.
The Unites States was a land grab; there was tons and tons and tons of land
and nobody was willing to build out Washington DC or other areas
because they were afraid of not getting paid.
The banks were just getting started, there wasn't good credit markets;
it was really hard to trust someone would pay you.
And since there was so much development that was needed
there was a little bit of reluctance so Thomas Jefferson conceived of this mechanics lien idea
and said, "You know, how we're going to make this work is if you build it
and we don't pay for it or you don't get paid for it,
you can have it.
It's yours - it's yours to sell because you're the one who bui8lt it."
It's a very simple concept in a way and it's really evolved
to create a very complex framework of laws all over the country
that basically operate to provide his sort of protection.
Now this would never have worked pre-America,
and that's why it's a uniquely American law, a unique American idea.
It does exist now in some other countries in different forms
but the concept is understandable because in different countries you would have a problem
in that the ownership of land was reserved for aristocrats.
America on the other hand was very land rich and it was conceivable
that a tradesperson could get a piece of the land if they did work and was not paid.
That is the mechanics lien instrument in a nutshell.
There's a lot more to it such as what it does, why it's effective,
how to use it, how to preserve it, how to file it;
a lot of questions. No need to go into all those questions right away.
This is just a primer on what a lien is, what a mechanics lien is and why exactly it exists.