When you are making a living in the construction industry, there are a whole host of junctures where things can go awry when it comes to getting your payment. Just consider the chain of people that the money has to go through: the end clients that want the building, their bank, the architects, engineers, suppliers, transporters, contractors and subcontractors who do the actual building, specialists for different things (if your project happens to need any), exterior and interior designers, down to the painters and the people who will get stuck with doing the cleanup.
In view of all those potential financial bottlenecks, it is a good idea to have some way of securing your due share if anything should happen to go belly-up at any point along the way. For that purpose, you can file for a mechanic’s lien to make sure you will get priority payment when things tumble downhill. Click here for a good, concise explanation of what a mechanic’s lien is and how it works. To make the whole process smoother for you, here are some of the worst slip-ups you can make with them.
Not Sending a Notice of Intent Beforehand
Before anything else, remember that filing a lien is a last resort. It can freeze construction and really complicate things, so first try all other alternatives to resolve your issues and get your due payments. Things like private discussions, civil consensus, inviting a trusted arbitrary and so on are some of the most usual ones.
After none of those strategies work, you can go on to the legal side of things and send a final warning by filing a NOI — a Notice of Intent to File a Mechanics Lien. This is basically the last shot for the other side to give up what they owe you before they get in trouble. If you deny them this opportunity, you will be the one to get into hot water for it.
After all, trends show that most payment problems in construction projects (especially big ones), happen simply because the communication between various tiers of the teams got a hiccup somewhere along the line. The “big chairs” may not even know that they owe you. Polite and timely reminders tend to fix it right up.
When you send in a NOI, you are taking things to the extreme. Because nobody likes the holdup, chances are you will have lots of willing helpers to pressure the non-payers into behaving. Generally speaking, this penultimate measure will ensure that you get paid your dues within one to three months without actually having to file for a lien. This is true in about half the NOI cases. If you happen to land in the other half, at least nobody can blame you.
Not Giving the Correct and Complete Information
The necessary information for a mechanic’s lien includes personal info, property info, and the specified amount for your claim.
A lien is duly recorded and filed away by the relevant state authority, and they can reject your claim for a whole bunch of reasons. You can get turned down because you made a typo in the form or put an address on a wrong place in the page. More importantly, there are strict rules to follow regarding the actual content.
Personal information needs to be full-form and appropriate to your business status. If you are representing just yourself as an individual, put down whatever name you have in your driver’s license. If you are the only operator of a business that is not a company entity (not registered as a LLC., Inc. and so on), you need both your personal and your trade name in appropriate form. Examples: “John Doe doing business as Terra Brick Suppliers” or “Jane Doe d/b/a Roots Foundations Laying”. If you represent a company entity, always include the business designation.
Property info typically requires “legal property description” in addition to the address, meaning — be insufferably detailed. Seriously. City records are notoriously out of alignment with actual current addresses, so include bounds data, parcel numbers, lot, block, or references to legal records.
The amount you can file for varies between states. Consider your specific expenses and double check if state lien law includes or restricts interest.
Filing for a Lien to Which You Are Not Entitled
This one features three common scenarios: you do not meet preliminary requirements, you filed for the wrong kind of project, or you are not actually licensed in the state.
In most states, you will need a preliminary notice of some sort, and different places give it different names, like “twenty-day notice”, “notice to owner”, “pre-lien”, “notice of furnishing” (we don’t get it either) and even generic stuff like “monthly notice” (triple-check everything in Texas). Anyway, if you do not send one of these, you will be denied your lien rights before you even start building. Deadlines vary and are more rigid or flexible depending on each state, so always research the local legislature before you send in any papers.
Also consider the kind of project and your specific role in it, to prepare the correct lien form. Project types are public (state or federal funding, you make a payment bond claim) and private (everything else, residential and commercial things, you make a mechanic’s lien claim). Your role refers to prime- or sub-contracting, material supply, leasing equipment or whatever else you do.
Finally, the validity of your claim largely depends on your license. If you are not licensed for that specific kind of work in that specific state, just give up now. Most places would not even let you do anything about not being paid if you are not allowed to do the work that needs paying. Your best bet is to always just play it safe and update your license for whatever you need.
