Common Mechanics Lien Mistakes

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Mechanics Liens In General

• mechanics liens

• security interest in / to property granted to parties in the construction industry for the furnishing of labor and/or material to improve the property


• mechanics liens: construction lawyers agree that mechanics liens are the best tool to virtually guarantee payment on construction projects

• “a personal guarantee or joint check agreement is nice to have, but not a substitute for a lien or bond claim” joe virene, esq.

• “an unpaid contractor’s best friend” david arena, esq.


• mechanics liens: construction lawyers agree that mechanics liens are the best tool to virtually guarantee payment on construction projects

• “an essential collection tool for contractors and material providers in construction projects” paul bauducco, esq.


• mechanics liens work to get parties paid in numerous ways.

• given the power of the mechanics lien instrument in getting parties paid, it’s well-known, and well-used in the construction industry

• despite (or because of) this supposed familiarity, mechanics liens are frequently prepared or filed incorrectly, and are mistake-filled.


• mistakes in preparing, filing, serving, or failure to meet state specific deadlines can be fatal to a mechanics lien claim

• this means that you cannot remain in a secured position, and your financial risk is significantly increased

Mechanics Lien Mistakes

• mechanics liens, and the rules, regulations, laws, and requirements surrounding them, are complex and complicated.


• 1. Center of the World Syndrome



• other people make mistakes, but you know what you’re doing



• other people make mistakes, but you know what you’re doing

• you are familiar with legal rules and requirements, (at least in some cases), so you know what to do



• exemplified by these type of statements:

• “i’ve dealt with liens before, i know the law”

• “i’ve filed tons of liens, and never had any problems”

• “i’m going to follow florida’s rules everywhere because they’re the most strict”


you’re probably wrong


• mechanics lien rumors are not mechanics lien requirements

• deadlines vary by state, and even the date from which the deadlines are calculated can differ

• notice requirements also differ from state to state and potentially from project to project




• it’s impossible for one person to completely know each and every rule applicable to each and every situation for one state, let alone when that party has projects in multiple states.

• and, even if the general requirement is known, there are exceptions and nuances that can change the outcome


• it’s not the CFM’s (or company owner, etc.) job to know all the rules - there are experts, and probably more importantly there is technology, that can help.

• technology can know the requirements for you - and doesn’t get confused, or make mistakes

• blindly trusting yourself in these complicated matters can result in missing notice requirements, missing lien deadlines, filing liens without lien rights, and more


• 2. Details, details, details


• 2. Details, details, details

• mechanics liens require specific details to be present, and the failure to be absolutely correct, or provide enough information can be devastating to the lien claim


• for example, NY case

Used in Lien: A&L Construction Corp.

Formal Name: A. & L. Construction Corp.

• resulted in lien being invalidated

• limited and very specific decision (some proof that the error was just the result of a “scrivener’s mistake” probably could have saved the lien) but this shows the fickle nature of courts, and outlines the potential consequences for being even slightly incorrect


• while misidentifying a GC or a property owner may not always invalidate a lien claim, it’s possible that it could


• there are other details that can cause havoc on lien claims, as well:

• other typographical errors can come into play

• GA lien said “365 days” instead of “395 days” and left out the word “action”

• resulted in the invalidation of the lien (all the way through the GA Supreme Court)


• details matter for other reasons that identification and typographical content

• details in timing matter, too

• recorder delay (some counties are very backlogged)

• unpaid balance states - lien may be limited to the amount unpaid by Owner at time lien is filed (or notice given). delay can result in expiration of lien rights

• murphy’s law


• 3. Property Descriptions


• 3. Property Descriptions

• identification of the property is extremely important (it’s what the lien attaches to) and many states have heightened requirements for the description

• street address may not be sufficient



• 4. Right to Lien


• 4. Right to Lien

• just because you are unpaid and want to file a mechanics lien does not necessarily mean that you are allowed

• while, generally, all parties that perform work for the improvement of property are able to file mechanics liens to secure payment for that work, there are requirements and exceptions


• work performed

• some work doesn’t qualify for mechanics lien protection (what does is defined by statute)

• if preliminary notice or notice of intent is required within a specific time period - it must be sent to be able to file a valid lien

• the lien itself must be filed within a certain time period (that varies by state) not complying with this deadline is fatal to a lien claim


• licensing

• if you are required to have a license, that license may be required to file a valid mechanics lien.

• if not licensed when required you can’t file a mechanics lien, and you may be working for free [some states don’t even allow unlicensed contractors to sue for non-payment disregarding mechanics lien protection]


• 5. Don’t Be Greedy


• 5. Don’t Be Greedy

• interest, attorneys’ fees, filing fees, and the like can generally be recovered if a foreclosure action is necessary to enforce a lien - but is almost always not allowed to be claimed in the lien amount itself.


• exaggerated liens can be invalid

• exaggerated liens could result in sanctions, or even criminal charges

Conclusion - Mistake Review

1. you’re probably wrong (center of the world problem)

2. details, details, details

3. description of property

4. right to lien

5. don’t be greedy

Conclusion

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questions?

Law

Common Mechanics Lien Mistakes