No matter your industry, payment disputes and collections are a common issue. You may have performed all the work described in your contract – same completion dates, same scope of work, same everything – but you still are not paid. In some cases, your client may be dealing with unknown financial issues that are impacting your ability to get paid for work performed.
In the business of construction, this is when mechanic’s liens can save the day. Depending on the state in which you worked, mechanic’s liens may be known as materialmen’s or constructor’s liens, but the core concept is consistent. Liens allow contractors and suppliers like you to record your debt against the improved property and ensure that you get paid.
Eligible contractors, subcontractors and material suppliers are entitled to file a lien claim on a project as a statutory right. These lien privileges cannot be surrendered in any contract. Any business that contributes to a construction project needs to be aware of mechanic’s liens and how filing a mechanic’s lien claim can speed up your ability to get paid promptly.
Who Can File a Mechanics Lien? Can You? Should You?
Contractors, subcontractors, and material suppliers can file a mechanic’s lien claim to protect themselves from being paid less than what they are owed per the contract and from not being paid at all. It is worth your time to determine if your business is eligible to file a mechanic’s lien claim against an improved property in your state.
Every state has its own law governing mechanic’s liens. The specific state law establishes who can file a lien claim, where that lien claim is filed, and the latest date when that lien claim can be asserted. These issues are established by the location of the improved real property only.
Consider a security alarm installer with offices located in Northeast Pennsylvania. The business works directly for both property owners and general contractors. The security systems are installed in office buildings, police stations, and multi-unit apartment buildings. Based on his well-established reputation as a highly qualified professional, the security contractor performs work on projects located everywhere from Scranton, PA, to Paterson, NJ. Is he eligible to file a mechanic’s lien claim when he does not get paid?
It’s complicated! Mechanic’s lien claims in New Jersey are filed with the County Clerk, while Pennsylvania lien claims are filed with the prothonotary of the Court of Common Pleas. New Jersey has three separate statutes that set forth the requirements to file a lien on commercial, residential, and governmental properties. Pennsylvania permits contractors to file a mechanic’s lien claim based on a verbal agreement, but New Jersey requires a written contract as a prerequisite to filing a lien claim.
You owe it to yourself to get your head around the unique laws in your state (or get in touch with an expert) so you can understand whether you can file a mechanic’s lien claim to collect the payment that you put in those hard-earned hours for.
Don’t Miss the Right Timing! When to File a Mechanics Lien
The deadline for filing a lien claim varies from state to state and may vary within the same state based on the type of project or property against which the lien claim is filed. The window of time in which a mechanic’s lien claim may be legally filed usually starts on the most recent date that the contractor performed contract work on the improved property or the date on which the material supplier delivered goods to the improved property.
Even in states in which the deadline to file a lien claim turns on the last day that the claimant was physically present on the improved party, individual states may have additional requirements or statutory provisions that impact the deadline by which claimants can lawfully file a mechanic’s lien claim.
In certain states, a property owner can file a “Notice of Completion” (NOC) which legally shortens the window of time in which an unpaid contractor can file a lien claim against the property. A NOC filed in California can shorten the time for claimants to file a claim from 90 to 30 days. An Arizona NOC will shorten the duration from 120 days to 60 days. NOCS filed in Nevada and Utah can also reduce a claimant’s window to file a lien claim (from 90 to 40 days and 180 to days, respectively).
If you have issued an invoice for construction work or materials performed under an agreement and not yet been paid, the time to file is NOW. If you allow the deadline to file a lien claim to expire, you are forfeiting your statutory right and accepting the obligation to hire a lawyer.
How to File a Mechanic’s Lien
Lien Line was founded to help unpaid contractors and suppliers file mechanic’s lien claims to collect what they are owed without hiring an attorney. Our objective is to make a complicated legal process as simple as possible so that claimants can handle collections themselves. Lien Line is focused on helping you file your own mechanic’s lien claim to improve how fast and how much you can collect from your company’s ordinary collections efforts.
Lien Line is not a law firm and cannot advise you on how to handle your complicated construction dispute. However, Lien Line will only offer its assistance in a state after it has first secured the guidance and counsel from an attorney licensed in that state whose practice areas include expertise in mechanic’s liens for construction disputes and real estate matters.
If you have a complicated construction dispute, or a “bet the company” case, Lien Line recommends that you directly reach out to our recommended legal counsel in your state in order to get a better understanding of your recommended options for prevailing in your state.
The Benefits (and Drawbacks) of Mechanics Liens
Benefit 1: Getting Contractors Paid
The primary benefit of filing a mechanic’s lien claim is that it allows a subcontractor, lower-tier subcontractor, or material supplier to take their unpaid bills directly to the owner of the improved property despite the fact that the claimant and owner have no direct contractual agreement.
Benefit 2: Moving Contractors to the Front of the Line
A subcontractor or supplier who files a mechanic’s lien claim can cut in line in front of the general contractor by taking their unpaid invoices directly to the property owner. Filing the lien claim is a necessary prerequisite to filing a formal lawsuit against the property owner to “foreclose” or “perfect” the lien claim for the unpaid bill.
Benefit 3: Giving Property Rights If Property Owners Don’t Pay
Filing a mechanic’s lien claim for an unpaid invoice is often sufficient to get your unpaid invoice paid. However, if the claim remains unpaid, the lien claimant has the right to file a lawsuit against the owner to enforce that claim within the time prescribed by state law, including initiating a foreclosure action against the property to satisfy the unpaid bill.
Benefit 4: More Negotiation Power
Even when you have the facts and law entirely in your favor, it can still take years and an unknown amount of legal costs to secure a decision in your favour. Filing a mechanic’s lien claim will cloud the property’s title and frustrate the sale of that property until your bill has been paid off.
Drawback 1: It Can Be Costly and Time-Consuming
State legislatures enacted mechanic’s lien laws so that unpaid contractors and suppliers had the statutory right to be paid for their improvements to a real property. That’s a worthy goal but the process is not intuitive or simple. Hiring a qualified service provider such as Lien Line to assist you in drafting your mechanic’s lien claim can save your company considerable time and expenses.
Drawback 2: Potentially Complex Legal Procedures
Filing a mechanic’s lien claim for your unpaid bill can be a dependable way to collect for performed contract services. If there are other issues on the project, including unpaid change order requests, delay claims, and asserted back charges against your company, filing a lien claim is likely to elicit a forceful legal response from your client and/or property owner.
Drawback 3: Potential for Disputes
Filing a mechanic’s lien claim gives the unpaid contractor or supplier the statutory right to assert their unpaid bill to the owner of the improved property, but it does not always guarantee that your company will be paid whatever amount is claimed. If you lien a job as a subcontractor or supplier, and the owner has already issued payment to the general contractor for your work or contribution, you should expect that the property owner will aggressively dispute her obligation to pay twice for the same work performed or materials delivered.
Drawback 4: Limited Recovery
Filing a mechanic’s lien claim is only appropriate when your company has performed its contract work and the invoices for that contract work have not been paid in a timely manner. It is not an appropriate standalone tool for your company to use if you are seeking compensation that exceeds the amount set forth in your contract.
Conclusion
Please don’t allow these potential drawbacks to discourage you from filing a mechanic’s lien claim to collect your unpaid bill. Lien Line is transparent in its approach. We focus on helping clients file their own mechanic’s lien claims because it gets results. If you file an accurate mechanic’s lien claim for performed contract services, your odds of collecting every penny that you are owed skyrocket. Our job is to help you file your mechanic’s lien claim so that you do not have to waste time and money chasing those accounts.