When businesses don’t get paid for working at someone’s home, their super power is the mechanic’s lien. Recorded in the county where the work is done, it attaches to the title of the home. The last thing a homeowner wants is a cloud on the title. Liens make a home hard to sell, to borrow money against, or to refinance until the lien is resolved. So, warning the client of an intent to record a lien usually has the desired effect: the client pays the bill.
Strong stuff! It’s said that Thomas Jefferson introduced the mechanic’s lien into U.S. legal practice, to encourage construction workers to build in the early days of the country. In those days, construction workers were called mechanics. Today, the instrument is interchangeably referred to as a mechanic’s lien or a construction lien.
Who Can File?
The mechanic’s lien is simpler than suing to enforce a contract, and is available to most any contractor who worked on, or supplied equipment or materials for, a job related to a permanent home improvement. There are limits, though. For example, the Kansas construction lien law allows filings for “labor, equipment, material or supplies” insofar as they are “used or consumed at the site of the property” involved. Suing under contract law is still available to the contractor, and can cover more scenarios and result in a higher payment. A lien can recover the amount already due and left unpaid — not the entire job.
Subcontractors too can file mechanic’s liens against homeowners to recover payment owed for finished work, even though the general contractor is the party responsible for paying the subcontractor. If they couldn’t use a mechanic’s lien, subcontractors providing work or supplies might lack leverage to make general contractors keep financial promises. A subcontractor using a lien effectively holds the property owner responsible for keeping the general contractor honest.
But no matter who uses it, this super power should only be wielded after requests and warnings have failed to produce fair and agreed-upon payment. Beware of overstepping the law’s bounds. Here’s an example of a frivolous and excessive lien law, from Washington state. It can force the contractor not only to show up in court, but also to pay costs and fees.
What Kind of Notice is Required?
A valid lien follows a unique set of requirements of the state where the job is done. Contractors file in the county recorder’s office or local circuit court to claim their interest against the property. A subcontractor must first send a demand letter to the general contractor for the payment owed, and may need to send a notice of intent to the homeowner, too. The homeowner needs to be given a certain number of days to pay the balance. Only then can the subcontractor can file a lien.
What kind of notices must you give during a work project to preserve your right to file a lien for unpaid bills? Some states require:
- Preliminary notice to the property owner: This may be required early in the job to preserve the right to file a lien. For example, under the California mechanic’s lien law subcontractor or material supplier must serve the homeowner with a preliminary notice within 20 days of the start of the job or the materials delivery — or else the business loses lien rights for anything done more than 20 days before the notice.
- Notice of intent to lien: A notice of intent, or NOI, allows the homeowner a certain number of days to pay the business. Even where it is not necessary, it makes sense to send. As noted above, it usually works, making filing a lien unnecessary.
How Does Filing the Lien With the County Work?
County lien forms, such as this mechanic’s lien form for Chester County, Pennsylvania, are available and continuously kept updated at Deeds.com, with deadlines and details about your state’s lien rules, and line-by-line instructions shown. All mechanic’s lien claims need to be filed by the recorder in the county where the house exists — that is, where your construction occurred. Your claim amount is the unpaid amount due — that is, the amount due for work actually done or materials actually delivered. Other recoverable costs and fees depend on state law, and though your county recorder’s office may not give you legal advice, it can answer local rule-specific questions.
A few points to know when filling out the form:
- You’ll need to describe the work or materials supplied, identify the property owner, and identify yourself and your address.
- Use your full business name, if and only if you have registered your business as a legal entity. If not, use your full, correct name, “doing business as” your trade name.
- Identify the property precisely, to enable the county recorder to index the lien correctly. Find the home’s legal property description on the recorded property deed.
- File your lien within the state’s time frame. Otherwise, there’s no valid lien. In California, for example, the mechanic’s lien must be recorded within 90 days of finishing the work, or from the time the homeowner accepted, or started using, the upgrade.
The work of filing a mechanic’s lien can be a job in itself, but at Deeds.com, we’re here to help. And we’re glad to see a growing number of counties allowing e-filing (electronic filing) for mechanic’s liens. The e-filing option is a real time-saver for filing or releasing a mechanic’s lien. A Whereas people used to use postal mail or a courier or physically show up at a courthouse, e-recording is now becoming the norm.
Once It’s Filed, What’s Next?
Once a lien is filed, the lienholder must post or send a notice to the homeowner. State law will direct this to be done in a certain way. Generally, you need to serve (deliver) a copy of the lien claim accompanied by your notice to everyone affected. For subcontractors and sub-subcontractors, best practices include sending a copy of your filing to everyone above you in the chain of businesses.
The usual steps entail filing, receiving your official copy of the lien, and immediate service to the recipients by registered or certified mail. But not all counties and states go by the typical service-of-notice steps, and some interpret their rules more or less strictly than others. For example, Pennsylvania allows subcontractors to serve formal notice of an intent to lien by FedEx. American Interior Construction & Blind v. Benjamin’s Desk, 206 A.3d 509 (Pa. Super. Ct. 2019).
The key is that the property owner actually received timely service. Have, and keep proof of, your attempts to serve the lien, and any documentation that the homeowner received the delivery. Some states require a Proof of Service form, completed and signed by whoever delivers the notice and the claim to all impacted parties, including, of course, the property owner. The affidavit is filed with the county recorder to prove you made a timely delivery.
What Happens When a Lien Goes Stale?
Your mechanic’s lien will quickly go stale if neglected. State law controls how long you get to work out a resolution with the property owner or to sue. It can be two months; it can be two years. Under California lien law, for example, the business must file suit to foreclose on a mechanic’s lien within 90 days after recording, or it’s null and void.
If you are a contractor, subcontractor, or materials provider and you’re paid in full or your lien expires, cancel it through a lien release at the county recorder’s office where you filed it. If you neglect to do this, the homeowners may request a lien release from the court by showing a proof of payment. If the homeowner is forced to hire a residential real estate attorney or construction law firm to deal with the lien, the court can charge you for the owner’s legal fees.
As you can see, a lien takes serious attention and follow-through on the part of the business. But in some cases, at least notifying a property owner that you could file a construction lien, even if you don’t, ensures a fair day’s pay for a full day’s work.
Photo credit: Hunter Haley via Unsplash