When it comes to labor liens, the details and laws vary by state since they are governed under state law. In Florida, a labor lien can have a huge impact on the sale of a property. Whether buying or selling, the involved party will want to know how a labor lien could impact the sale of the property in the short and long term. Many may be unfamiliar with what a labor lien is, so it's a good idea to cover the basics.
A labor lien is filed with the county in which the work was performed in instances where home laborers are not paid for their work. This may happen when contractors hire subcontractors and then do not pay the subcontractors per the agreement between the parties. If the owner and contractor sign a contract that is worth less than $2,500, then anyone who does not have a contract with the owner does not have lien rights. On jobs that are less than $2,500, liens can only be filed by the contractor.
In addition to physical laborers, designers may also file liens, and these rights may still be exerted even if the design was not used. This would occur where design services where performed for a property but not put into motion due to some circumstance in which the service was halted or taken in another direction. The relationship between owner, contractor and sub-contractor can be complex and varied, and it is best to assess any of these situations fully to understand that relationship and when it can affect the sale of a property. Clearly, a labor lien can greatly impact the sale of a property and usually in a negative way.
The worst case scenario is that an old labor lien would resurface after the sale of a property and affect the new owner. Obviously, this is a scenario that the property owner would want to side-step. It is important to understand what could be at stake with the sale of a property. While it is illegal for a seller to fail to disclose this information, it could still occur for a variety of different reasons.
Source: FindLaw, "Contractors' Liens: Select State Laws," Accessed Feb. 26, 2018