A mechanic's lien is enforced by foreclosure. The foreclosure is a legal action against the owner and those whose claims against the property are inferior to the lienor's. A judgment of the court in favor of the lienor orders the sale of the property by an officer of the court, the payment into court of the moneys realized at such sale, a marshalling of those claims against the property which have been affected by the foreclosure, and a payment of the claims in their proper order. The law provides that if there are at the time of the action a number of mechanics' liens against the property, all must be brought into the action so that one action at law disposes of them all.
The right to file a lien is an important one to mechanics and material men. They can ascertain the ownership of the property from the public records, and also find the amount of mortgages or other liens against it. This information assists them in determining whether or not to extend credit to the owner of the property. With due care losses through bad debts can be reduced to a minimum. Other States than New York have laws which give greater effect to mechanic's liens. Objection may be made to some of them on the ground that they tend to discourage building operations especially those of a speculative kind. New buildings are often financed by means of building loan mortgages. It is reasonable to assume that mortgagees will not be attracted to the building loan market should they find that the law protects the mechanic's lienor to the mortgagee's detriment.
The filing of mechanic's liens against a building in course of construction is usually an indication of the inability of the owner to meet his obligations. The important thing for all persons interested in the operation is to get the building finished. It is then capable of producing an income and is more readily saleable. Building loan mortgages are advanced from-time to time during construction and in some States (New York, for example) advances made by a mortgagee before mechanic's liens are filed are prior in lien to the claims of those who per-" formed the work and furnished material. Cessation of work on the building often results in a foreclosure of the building loan mortgage and a consequent loss to the contractors. To remedy this situation the New York law provides that with the approval of the mechanic's lienors holding seventy-five per cent of the amount due, a trust mortgage may be made for the benefit of creditors and additional money borrowed on a mortgage for the purpose of bringing the building to completion. All the liens take equal rank and become subordinate to such a mortgage. The assumption is that on completion the building will be worth enough to repay (1) the money borrowed before the liens were filed, (2) the additional amount borrowed to complete the building, and (3) the amount of the trust mortgage given to secure the amounts due the lienors. Anything the building may bring on a sale in excess of the first and second items will go to pay item number three and will be so much the creditors will get that they would not have received had the original mortgage been foreclosed on an uncompleted building.
The law further provides that lienors of a piece of property to the extent of seventy-five per cent of the aggregate amount of the liens may consent to a sale of the property upon condition that a specified sum be deposited with the county clerk. The property is then freed from the liens and the lienors have recourse to the sum of money so deposited. This is a practical provision of the law designed to permit the sale of the property by negotiation and agreement (even though it bring less than the total liens) rather than at a forced sale resulting from a foreclosure.