Mechanics Lien Release—Do You Also Need a Settlement Agreement?
You have filed a mechanics lien and put pressure on the owner or general contractor. Happily, payment has been made in full and you are prepared to sign, notarize, and have recorded a mechanic’s lien release. But should you go the extra mile and also prepare an overall settlement agreement?
That is a good idea. The mechanics lien release simply cancels from record the mechanic’s lien. Actually, it is not erased—it merely evidences discharge. Therefore, it relates solely and exclusively to the payment obligation on your contract. That is all.
Assume you are a subcontractor and have now been paid. But later, the owner sues the general contractor for incomplete or allegedly defective work representing your portion of the project. The general contractor than cross- complains against you for indemnity. But you wanted to walk away from the entire transaction after payment on the mechanics lien. Now you are stuck in the middle of a lawsuit. A mutual settlement agreement would prevent this.
Such an agreement specifies that both parties release their right to bring claims, disciplinary actions, arbitrations, or lawsuits, either affirmatively or by way of cross-complaint, against each other relating to the specific project. This goes one step further than the lien release and gives full protection.
So releasing the mechanic’s lien is only the first step. It is a good idea to have us also draft a settlement agreement. Call us for details.