This is one of the most common, and most contentious, questions in Indiana construction law. A subcontractor finishes the job, the general contractor never pays them, and the subcontractor wants to know whether they can lien the property. The property owner, meanwhile, has already paid the general in full and wants to know how a stranger they never hired can put a cloud on their title. The general contractor is somewhere in the middle, often dealing with a cash flow problem or a dispute with the sub that has nothing to do with the owner.
The short answer is yes, in Indiana, a subcontractor who has not been paid by the general contractor can place a mechanic’s lien on the property where they did the work, even if the property owner has paid the general in full. That is the rule, and it tends to surprise people on every side of the transaction. The longer answer involves how the lien is created, what the subcontractor has to do to make it stick, what the property owner can do to fight it, and what the general contractor can do to head it off. This post walks through all three perspectives, because in central Indiana these disputes tend to involve all three parties whether anyone wanted them to or not.
How a subcontractor gets the right to lien property in Indiana
Indiana’s mechanic’s lien statute is found at Indiana Code section 32-28-3, and it gives lien rights to a long list of people who provide labor or materials to improve real estate. Contractors, subcontractors, suppliers to prime or subcontractors, laborers, and equipment lessors are all eligible to file an Indiana mechanics lien if they are not paid for their work or materials. The subcontractor does not need a contract with the property owner to have lien rights. They only need to have furnished labor or materials that improved the real estate.
The reason for this rule, as old as it is, is that Indiana has long taken the position that the property itself stands behind the value of the work that went into it. The Indiana Supreme Court has described the historical purpose of mechanic’s lien statutes as making a property owner an involuntary guarantor of payments for the reasonable value of improvements made to real estate by the labor or materials furnished. Whether you think that rule is fair probably depends on which chair you are sitting in, but it is the framework Indiana operates under, and it is the starting point for everything that follows.
There are several wrinkles that matter, and they cut in different directions. Indiana distinguishes between alteration or repair work on an existing owner-occupied single or double family dwelling and original construction of one, and the pre-lien notice rules are different for each.
For alteration or repair work on an owner-occupied single or double family home, anyone selling or furnishing labor or materials on credit must furnish a written notice to the occupying owner of the delivery or work and of the existence of lien rights not later than thirty days after the date of first delivery or labor performed. That notice is a condition precedent to acquiring a lien, and missing it eliminates lien rights before the dispute even begins.
For original construction of an owner-occupied single or double family dwelling intended for the owner’s occupancy, the deadline is longer but the requirements are more involved. A party furnishing labor or materials on credit to a contractor, subcontractor, or anyone other than the owner must both furnish the owner with written notice of the delivery and the existence of lien rights, and file a copy of that notice in the recorder’s office of the county — both within sixty days of the date of first delivery or labor performed. Furnishing the notice and filing it with the recorder are both conditions precedent to acquiring a lien. Miss either one, and lien rights are gone.
One additional protection worth knowing for buyers in new construction: a lien for material or labor in original construction does not attach to real estate purchased by an innocent purchaser for value without notice of a single or double family dwelling for the owner’s occupancy, unless the notice of intention to hold a lien is recorded before the deed by which the purchaser takes title is recorded. In a central Indiana market with active new construction sales, that rule matters.
After the work is finished, the lien claimant still has to actually record the lien within a tight statutory window. A mechanic’s lien for residential projects must be filed within sixty days of the last date labor or materials were furnished, and a mechanic’s lien for nonresidential and other projects must be filed within ninety days from that same date. Those deadlines do not get extended. Blow the deadline, and the property cannot be liened, period.
What this looks like on the ground in central Indiana
Here is the scenario that plays out over and over in Indianapolis, Carmel, Fishers, and Noblesville. A homeowner hires a general contractor for a remodel or new build. The general subcontracts the drywall, the electrical, the HVAC, and the flooring. The homeowner pays the general on schedule, sometimes in full. Months later, one or more of those subcontractors records a lien on the property because the general either never paid them or paid them only in part.
From the homeowner’s perspective, this feels like being asked to pay twice for the same work, and that is a fair description of what a lien threat looks like in this situation. From the subcontractor’s perspective, they delivered real labor and materials in good faith, the general took the owner’s money without passing it through, and the lien is the only meaningful leverage they have left. From the general’s perspective, there is often a real underlying dispute about scope, quality, change orders, or backcharges that has nothing to do with the owner but is now spilling onto the owner’s title. Indiana’s statute does not really care whose version of the story is more sympathetic. It cares whether the subcontractor followed the technical requirements.
For the homeowner, the lien creates a cloud on title that will surface the next time the property is sold or refinanced. The owner generally has a few options: pay it off, negotiate a release, fight the lien if there is a defect in how it was filed, or wait to see whether the subcontractor follows through with a foreclosure suit. A recorded mechanic’s lien generally has to be enforced by foreclosure within one year, although a property owner can shorten that window by serving a notice to foreclose, which then requires the lien claimant to file suit within thirty days or lose the lien. There are real defenses available. If a required pre-lien notice was missed on a residential job, the lien is not valid. If the lien was recorded outside the statutory window, the lien is not valid. The statutory contents of the recorded lien also have to be right, including the correct owner name and an adequate property description. Indiana law sets forth specific requirements that unpaid construction parties must follow in order to file a mechanics lien claim. Lien claimants who try to handle the filing without counsel often make mistakes that an experienced construction attorney can spot quickly.
There is also a possible attorney’s fees argument that runs to the owner’s benefit in some circumstances. An owner of property can avoid liability for attorney fees by paying the general contractor the full amount due under the contract. That is one of the reasons careful documentation of payments to the general matters so much for owners.
For the subcontractor, the lien is not the only tool available. Indiana also has what is called a personal liability notice. Under Indiana Code section 32-28-3-9, a qualifying subcontractor may serve a personal liability notice on the owner, placing the owner on notice of amounts due and unpaid for labor or materials furnished to the project, and personal liability notices have no firm filing deadline, which makes this an option for a subcontractor who failed to timely file a proper mechanic’s lien. The notice forces the owner to hold back enough money from what they still owe the general to cover the subcontractor’s claim, and if the owner pays the general anyway after getting the notice, the owner can become personally liable for that amount. From the homeowner’s perspective, that is another reason not to release final payment to a general without first confirming the subs have been paid. From the subcontractor’s perspective, it is a meaningful backup when the lien deadline has come and gone.
For the general contractor, the best move is usually to head this off before it reaches the owner. Once a sub records a lien or sends a personal liability notice, the relationship with the owner is going to suffer regardless of how the underlying dispute resolves. Most generals who get into this kind of trouble in central Indiana would have been better off addressing the sub’s complaint directly when it was still a phone call rather than waiting for it to become a recorded document at the county recorder’s office.
What everyone should do once a lien is in the picture
If you are a property owner who just got hit with a lien, do not panic, but do not ignore it either. The lien sits on your title and can be foreclosed within the statutory window. Have a construction attorney look at the lien before you write any checks. There is a real chance it is defective, and even if it is not, there are strategies for resolving it that do not necessarily involve paying the full amount claimed.
If you are a general contractor and a subcontractor is threatening to lien an owner’s property, the worst thing you can do is stall. Dealing with the underlying payment dispute, even when you believe the sub is in the wrong, is almost always cheaper and faster than letting it escalate into a recorded lien and a three-way fight that includes your customer. We have written before about resolving construction disputes with a construction attorney in Indiana and about how to resolve a construction contract dispute, and both walk through options that do not require litigation.
If you are a subcontractor who has not been paid, time matters more than anything else. The deadlines are short, the requirements are technical, and the difference between a valid lien and a worthless piece of paper often comes down to whether the pre-lien notice was handled correctly and whether the lien was recorded within the window. Beyond the lien itself, there may also be direct contract claims, and depending on what the contract with the general contractor says, arbitration or mediation may come into play before anyone gets to court. If litigation ends up being the right path, our post on construction litigation in central Indiana walks through what that actually looks like.
There is a broader point worth making to anyone doing construction work in central Indiana, whether you are hiring it or performing it. The best time to think about getting paid, and about whether liens are going to enter the picture, is before the work starts. Clear contracts, lien waivers tied to payment, prompt invoicing, and an early conversation about who is paying whom and when are what keep small problems from turning into large ones. We have written about enforcing a construction contract in Indianapolis and about common mistakes small contractors make that lead to lawsuits, and the parties who avoid these disputes tend to be the ones who set up the front end of the job carefully.
Talk to a construction lawyer in central Indiana
Mechanic’s liens are technical, the deadlines are unforgiving, and the stakes are real money for everyone involved. Whether you are a property owner staring at a lien on your home in Carmel, a general contractor trying to head off a problem in Fishers, or a subcontractor in Noblesville who is tired of being told the check is in the mail, the right move is to talk to a lawyer who handles construction disputes in Indiana every day.
At Fugate Gangstad Lowe, we work with property owners, contractors, and subcontractors across central Indiana on exactly these issues, and we will give you a straight read on where you stand. Call us at 317-829-6797 or reach out through our contact form to talk through your situation.
The information provided in this article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. For legal advice tailored to your situation, please contact our firm directly.