How to File a Mechanics Lien
Many construction professionals can agree that managing lien securities and lien waivers is a difficult task. It’s not surprising, however, since lien laws across the United States require more than 100,000 combinations of documents, deadlines, dates and other stress catalysts.
Filing for a lien doesn’t have to be stressful though, especially when it comes to a mechanics lien. If you’re looking for a simplified process, then you’ve come to the right place.
The Mechanics Lien Process in 3 Simple Steps
The first thing you should know is that you’ll want to file a mechanic’s lien as soon as possible. If you wait too long and only file when a mechanics lien is needed, then you may be denied your request. In order to keep the ability to file your lien, you’ll want to send specific notices ahead of time, typically during the beginning of the project. These notices are often called ‘Preliminary Notices’ and ‘Notices of Intent to Lien (NOI)’.
There are three main steps when it comes to the mechanics lien process:
- Step 1: Preliminary Notice
- Step 2: Notice of Intent
- Step 3: Mechanics Lien
Step 1: Preliminary Notice
Sending a preliminary notice will be the first step in the lien process. Sometimes called ‘Pre-Lien Notices’ or ‘Notices to the Owner’, preliminary notices are sent by the construction party to inform the project stakeholder of who is working on the project. By sending this notice, you’ll also be protecting your lien rights. Most states will require the lien claimant to send a preliminary notice in order to later file a mechanic’s lien.
Remember though, this is just a precaution. Think of these notices as like low-cost insurance for your construction company. While everything may go smoothly, this is just to ensure that you are set up and will still get paid in case a problem does arise.
Step 2: Notice of Intent to Lien
Your next step in the process will be to file an NOI, or a ‘Notice of Intent to Lien’. If you have been working on a project, but have yet to be paid, you will send this notice as a final warning. This will give the paying party one last chance to settle the bill before you file a mechanic’s lien against them.
Some states will require claimants to send a notice of intent before filing a lien, but even if it is not required, it’s still recommended to send one anyway. The parties who make the payment will want to avoid being liened, so by sending an NOI, you’re letting them know that you’re serious about the payment while also giving them an opportunity to resolve the issue. Deadlines vary in the states where NOIs are required, but the notice is always sent after a preliminary notice and before a lien is filed.
Something to keep in mind is that you may be asked to sign a lien waiver during a project. Unlike other documents that protect lien rights, lien waivers will waive, or give up, lien rights. The parties who must pay out will often request lien waivers from those needing payment, so that they can protect themselves against double payment. Be careful about waiving your lien rights before you receive payment.
Step 3: Mechanics Lien
Mechanics liens are the most effective method when it comes to unpaid contractors and suppliers. Filing a mechanics lien turns the job site into collateral for the payment that a contractor is owed. This motivates the liened party to pay up and resolve the issue.
Deadlines vary by state, but generally a mechanics lien must be filed within a specified time frame from the last day that labor or materials were provided. After that, enforcing a mechanics lien is due within a set period of time from the date it was filed.
What happens if you file a lien and still aren’t paid? Here are a few options:
- Release the Lien
- Extend the deadline to enforce the lien
- Enforce the lien in court
With these tips, you should have a stronger understanding of how to file your mechanics lien and what to expect during the process. Still confused? We assist in helping contractors, material suppliers, and lenders manage their liens. Our service can help your construction firm take the complexity out of the process and make it simple to initiate and file.