Introduction to Construction Liens
Did you know that Construction Lien laws have been in place since 1791? Thomas Jefferson established the Construction Lien Law to facilitate the construction of Washington, D.C. (located in Maryland at that time). For more than 230 years, these laws have been safeguarding contractors and their rights. The law is on your side, and it’s essential to understand and leverage your legal rights to ensure you receive proper payment.
Construction liens, also referred to as mechanic’s liens or materialman’s liens, serve as powerful legal instruments designed to protect the rights of contractors, subcontractors, suppliers, and laborers involved in improving real property. These liens offer a means for parties to pursue payment for their work or materials if they are not compensated as agreed upon.
Construction liens can arise in a wide range of construction projects, including residential, commercial, and industrial. Improvements made to real property, including new construction, renovations, repairs, restoration, and other enhancements, trigger the contractor’s lien rights.
Understanding the Mechanisms for Filing a Construction Lien
Filing a Construction Lien involves following specific procedural requirements, such as adhering to filing deadlines, preparing the lien document, and fulfilling notice provisions. While this process varies depending on the jurisdiction, its fundamental purpose remains consistent: to offer a legal avenue for contractors to receive payment for their work on a construction project.
Key information typically included in a Construction Lien form are details such as: the property owner’s name, the property’s address and legal description, the dates of the first and last day of work, descriptions of the services or materials provided, the name of the hiring party, the contracted amount, and the outstanding balance owed.
Ensuring that all necessary information is included in your lien is crucial for effectively enforcing your claim. Keep in mind that this information varies in each state.
What Documents are Typically Associated with a Construction Lien?
- Notice of Furnishing/Preliminary Notice –Your role on a project (as a general contractor or subcontractor) determines whether a Notice of Furnishing is required. While not all states mandate general contractors to send a Notice of Furnishing, subcontractors are usually required to do so. This notice serves to preserve your lien rights and notifies the general contractor and property owner of your involvement in providing labor, services, or materials for the project. It’s crucial for subcontractors to send this notice promptly upon being hired, as failure to do so can jeopardize your ability to enforce a lien successfully.
- The Notice of Intent to Lien– In some states, it’s necessary to send a Notice of Intent to Lien before filing a Construction Lien against the property owner. Alternatively, this notice can serve as a way to apply pressure on the property owner, indicating that failure to pay within a specified period will result in a lien being filed.
- The Construction Lien – This document secures your debt against the real property.
- Discharge of Lien – Once you have received payment, it’s essential to discharge the lien.
- Notice of Intent to Foreclose – Should you decide to enforce your lien, sending a Notice of Intent to Foreclose notifies the property owner that failure to pay will result in the commencement of foreclosure proceedings.
- Foreclosure – This represents the final step. Hiring a local attorney is necessary to enforce your lien. The lien empowers you to foreclose on the property, prompting your attorney to file a lawsuit seeking foreclosure, among other claims.
The Impact of Construction Liens:
- Secures your debt against a real property, whether private or commercial.
- Insurance carriers may add the contractor as an additional payee on insurance checks.
- Prevents the sale of the property until your debt is paid.
- Halts property refinancing until your debt is resolved.
- It enables you to foreclose on the property as part of enforcing your lien.
Time Limits and Deadlines
It is crucial to strictly adhere to statutory deadlines when filing and enforcing construction liens. Failure to meet these deadlines can lead to the loss of lien rights, which essentially means forfeiting one of the most powerful collection tools at your disposal.
Let’s Address Some Common Questions:
Q: Should I file a lien on small jobs?
A: Yes! While it may not be cost-effective to hire an attorney for small jobs, filing a Construction Lien can still secure your payment and increase your chances of getting paid.
Q: Can I recover the cost of the lien?
A: It depends on your jurisdiction. Many states allow for the recovery of the lien’s cost. Alternatively, your contract may include provisions that allow you to recover associated collection costs.
Q: Can I file a lien when only a partial amount is owed?
A: Yes, you can file a lien for either the full balance owed or a partial amount. There is no minimum amount required to file a lien.
Q: I work in different states, how do I file in each state?
A: You have two options. You can either hire an attorney in each state where you work or use a software such as Need2Lien to file a lien in any state where you operate.
Q: Can I file a lien on public jobs?
A: Generally, no. Public jobs typically involve payment/performance bonds, and you can file a claim against the bond instead.
Q:How long do I have to file a lien?
A: Construction Lien deadlines vary by state, typically ranging from 90 days to 6 months. If you would like a copy of a 50-state survey on Construction Lien deadlines, please email the author for a copy: [email protected].
Q: How long do I have to enforce the lien?
A: The deadline to enforce or “perfect” a Construction Lien is specific to each state’s law. If you would like a copy of a 50-state survey on Lien Deadlines, please email the author for a copy: [email protected].
Q: What happens if I miss the lien deadline?
A: If you miss the deadline, you miss the opportunity to file the lien. You’ll need to pursue alternative methods to collect your money, such as hiring a collection agency or an attorney.
It’s crucial to understand that construction lien laws vary depending on the jurisdiction, with filing and enforcement requirements differing from one place to another.
Yasmin Whitmer
Yasmin Whitmer, a practicing attorney and founder of Whitmer Law and Need2Lien, specializes in representing restoration companies in Michigan. She noticed a common challenge among contractors: the high cost of legal representation for filing construction liens and lack of immediate access to attorneys. Recognizing the need for a more accessible solution, she launched Need2Lien.com, a user-friendly platform that simplifies the lien filing process. With Need2Lien.com, contractors can input project details easily, leaving the complexities of lien filing to Yasmin's team. This innovative approach empowers contractors to focus on delivering quality services while ensuring they get paid promptly. You can contact Yasmin directly at [email protected] or 248-671-4482.
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