A Mechanic's Lien (aka Construction Lien) attaches the amount you are owed for materials or services rendered, to the title of the property in question. It prevents the property owner from selling, transferring the title, or refinancing the said property.
Under Mechanic's Lien Law, the two broad categories are a public lien and private lien. The determination of which type of lien to is appropriate to file depends on ownership of the subject real property and the source of funding for the project.
A. Public Lien. A public lien must be filed within thirty days after final completion of the project is achieved. This time limit does not depend on when a subcontractor performs its work or when a supplier delivers its materials to the project. Instead, the period of time within which the lien must be filed is measured from final completion of the entire project. Some public agencies issue certificates of final completion so that this time frame can be determined. Most often, as long as the public funds have not been fully dispersed the lien will attach.
B. Private Lien. A private lien must be filed within four months of last performing work or delivering materials to a project if the project is a residence or within eight months if the project is commercial in nature. A private lien has a duration of one year from the date of filing and can be extended for an additional one year by the filing of a notice of extension of the lien, except for single family residences which require a court order to be extended.
In either case, before the expiration of the lien, a Mechanic's Lien foreclosure action must be commenced in order to preserve the lien. The Mechanic's Lien foreclosure action requires a summons and complaint be filed and served. Typically, a notice of pendency also must be filed.
It is important to recognize that a lien acts only as security for an underlying contractual or quasi-contractual debt. Although a lien can be filed for the full amount due, it is only enforceable to the extent that moneys are due and owing "upstream" to the party against whom the lien is claimed. If, for example, a general contractor has back charges, even if completely unrelated to the materials the supplier delivered to its subcontractor, the supplier's right to enforce its mechanics’ lien are reduced. Even if a lien is unenforceable, subcontractors and suppliers can still maintain a breach of contract action directly against the party with whom they contracted. The derivative nature of a Mechanic's Lien makes it important to file a lien as soon as possible. The filing of a lien typically results in the owner and/or general contractor withholding payments "down stream". Consequently, the prompt filing of a lien will usually result in greater funds against which the lien can attach and be enforced.
Additional devices to consider in the Mechanic's Lien area include a demand for terms of contract and a demand for a verified statement. The demand for terms of contract, if not responded to within thirty days, can create direct liability on the part of a remote party if the claimant cannot collect against the party with whom it contracted.
NB: In the case of either a Mechanic's Lien or a Payment Bond Claim, it is critical to prove that moneys are due under a contract. For suppliers, proof that materials were actually delivered to a particular job is needed. Accordingly, approved requisitions for payment, signed delivery tickets showing the name of the project, etc., are important proof of the amount due. Suppliers, if possible, should avoid shipments to a customer's warehouse, as lien and bond rights may be limited in such a case.
The best way for subcontractors and suppliers to enforce payment rights is to be conscious of their lien and payment bond rights, which act as security for contractual and quasi-contractual debts. Merely filing a Mechanic's Lien and making a will not typically result in payment. Sureties as a rule do not voluntarily pay claims and an owner or contractor will likewise not pay until the subcontractor and/or supplier "judicially" establishes its right to payment. While it is important to file a lien and/or make a for security purposes, it is equally important to speedily obtain a judgment or arbitrator's award. The time within which a recovery can be had depend on numerous factors, the most important of which is the claimant's ability to clearly document the amount owed.
Construction Lien Collections, LLC (CLC) is a full-service construction consulting firm specializing in the recovery of Mechanic's Liens. We utilize alternate dispute resolution and various proprietary techniques to resolve cases for our clients expeditiously and inexpensively. Approximately 80% of the cases we undertake are successfully resolved in 30-90 days without resorting to litigation.
Our services offer the following benefits:
Cost Effectiveness: Our fees are typically less than half of what attorneys or collection agencies would charge.
Expediency: CLC typically resolves cases within 30-90 days, whereas litigation can last several years and cost tens of thousands of dollars. Our service includes searching the property records, the fee for filing with the appropriate jurisdiction and notification to the property owner and contractor by certified mail.
Non-Adversarial Resolution Process: One of the most important benefits of our services is that we can preserve business relationships between our clients and their business partners due to our non-adversarial dispute resolution process.