Can Unlicensed Contractors File a Mechanics Lien?

Can you file a mechanics lien if you don't have a contractor license? The short answer is: It depends. In some states, unlicensed contractors are forbidden from filing a lien. In other states, it's allowed. Consult your state's lien laws to find out if you can file a mechanics lien, and read on below for a more specific answer to this common question.

Get licensed if it's required regardless of the lien laws

If you're doing work that requires a license without having that license, you're treading in dangerous water regardless of your state's laws. While some states are more liberal and allow unlicensed parties to collect amounts owed to them, it is very rare that the unlicensed contractor is not penalized in some way. Therefore, if you're unlicensed and doing construction work that requires a license, get licensed.

The issue we’re talking about here is: What happens if a contractor ends up having a payment issue on a project when they did not have a license?

Like many other aspects of mechanics lien laws and requirements, the answer to this question is, “it depends on the state.”

A state-by-state issue

In some states such as New York, the answer to this question is an unequivocal, “No.” In other states, the answer is a clear, “Yes.” Then there are several states such as Florida and Georgia where the answer is neither yes nor no. In these states, the answer is usually much more complicated and depends on several other factors.

The question here is whether you can file a mechanics lien if you're unlicensed. Unfortunately for unlicensed contractors, this question may be just the tip of the iceberg. In reality, unlicensed construction participants must ask a more significant question: can they recover payment for their work at all? The answer to this question may vary by state.

Scenario 1: Unlicensed contractors have no recovery options

In California and Washington, the laws against unlicensed contractors are very strict — unlicensed contractors have no recovery rights whatsoever. This means they cannot file a lien, or a lawsuit, or anything at all. If an unlicensed contractor provided $1,000,000 of work, and a party refused to pay them, the contractor would be without a remedy to collect the payment.

Not only can unlicensed contractors be denied payment in some states, but they may also be required to give back money already paid. New Mexico prohibits mechanics liens for unlicensed contractors and also prohibits filing suit to recover money unpaid even without mechanics lien protection. Further, New Mexico may also require unlicensed contractors to return money already paid to the property owner.

It is also worth noting that in many states an unlicensed contractor may be subject to fines and/or penalties, may be liable to the property owner for damages, and may be guilty of a misdemeanor or even a felony.

Scenario 2: Unlicensed contractors are penalized, but can file a mechanics lien

Is it fair to strip unlicensed contractors of all collection tools?

There are two schools of thought on this. In Washington and California, the legislature considers it more important to regulate the unlicensed contractor market than to ensure that unlicensed contractors get paid. States like Louisiana take a different approach. In Louisiana, the unlicensed contractor is still penalized (i.e. they can get penalized by the licensing board, their contract is declared null and void, and they can only recover the "minimum value" of their work), but they are still allowed to recover some sort of compensation for the work they performed — and that means, an unlicensed contractor in Louisiana can file a mechanics lien.

If you're doing work in California or Washington and are unlicensed, you're really out of luck. If you're in Louisiana, you have some legal ground. Elsewhere, it's really important to examine that state's liens laws to determine if it is possible for unlicensed contractors to file a mechanics lien.

Ultimately? The only way to be fully protected is to have a valid license for the work you are performing, no matter where it is.

Get licensed: The Ultimate Guide to Contractor Licensing in Every State

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