I hired a contractor to do some work on my home. He took it upon himself to do extra work and then charged me $2500. I told him I did Not ask him to do this and that I would pay for the materials, because I don't think anyone should take money out of there pocket to put into my home. He refused and said he was going to put a lien on my house unless I paid him in full.
The general way lien statutes work is that the workman who doesn't get paid files a lien on the property. Then he has a certain amount of time to "perfect" the lien by bringing suit and obtaining a judgment. After a certain period of time goes by without his bringing suit, the lien expires. But if the property owner sells the property in that interim period, he's got to satisfy the lien at the closing, or he won't be able to convey the unencumbered title to the property upon which the buyer will insist.
If the workman gets judgment, then he gets a secured interest in the home junior to other secured interests, like the mortgage which already existed when the workman did the work. In theory he can foreclose on his interest just like a mortgage holder can bring foreclosure proceedings, but it means paying off the holders of senior interests. Also if the workman gets judgment, then the value of the judgment collects interest at the legal rate set by state law.
In your case the dispute is about work he did that was not agreed to by you. That would be the subject of the suit.
Wisconsin law surely has wrinkles I don't know about, so don't take what I said above as legal advice. It's just my two cents on the facts you present in light of general principles of law. If you need legal advice, please consult a lawyer who holds Wisconsin licensure.
General Practice Lawyer
In Wisconsin a contractor that performed work on a property and that has provided value to that property can file a lien on that property if not paid. However, in order to do so there are specific rules that must first be followed. Within 60 days of beginning the work the contractor must provide you with notice that he could and would file a lien on your property for non-payment of future bills. If he has not given you notice of his right to file a lien (and it could be in the contract) then he is later prohibited from doing so even if the bill does not get paid. The Notice provision cannot be waived. If he failed to provide you timely notice, then you can have the lien removed.
Before the contractor can file a lien (assuming the 1st notice requirement was met) he must send you a notice that he intends to file a lien for X dollars 30 days prior to filing the lien. If he does not, the lien is not proper.
If the contractor did extra work without authorization or request, or even better if you told him not to, he has no legitimate right to file a lien and you will have a cause of action against him if he does. You should document what was agreed to and any conversations or subsequent agreements. Since the dispute is less than $5000, Wisconsin allows you to utilize small claims court which will make things easier and cheaper for you. If the extra work that he did was unwanted, you may claims for damages also.