The good news is that if you’re a contractor, it’s possible to get security for that unpaid debt, even after the work is done.
A properly filed Mechanic’s Lien will allow you to foreclose on the property that you provided labor or materials to improve.
Short, Strict Deadlines. The deadlines for filing Mechanic’s Liens are both short and strict. In some cases, the deadline will have passed before you realize that the customer isn’t paying. In addition, the statute is difficult to read and understand, because there are multiple deadlines to watch out for. If you miss one of the deadlines, and your lien may not be enforceable at all, meaning that you won’t be able to foreclose it. If that happens, you’re no better off than you were before you filed the lien.
Required Notices. Providing proper notices is critical to the validity of the lien, and you’ll need to notify every contractor between you and the owner. For this reason, it’s always advisable to gather this information at the start of the job, when everyone is friendly and eager to move forward. Later, it may be difficult to find all of the proper people, and an attorney has skills and resources to do this more quickly.
Identifying the Property Owner. It is critical that the owner of the property be notified of the lien within five days of the day the lien is filed. Providing notice of the lien to the owner also increases the likelihood that the lien will be paid without having to file suit to foreclose it. You cannot depend on property tax records to determine the ownership, because the only thing the taxing agencies care about is where to send the bill. You need to take the information you see in the tax records and then look in county real property records, find the deed, and confirm that the property hasn’t been sold. If you don’t know how to do this, you need a lawyer.
Legal Description of the Property. Your lien needs to show the proper legal description of the property, which you will find in the deed. Avoid using the legal description in the property tax records, which is incomplete and sometimes inaccurate. If the property is properly and completely identified in your lien affidavit, it will be difficult for the owner to sell the property without providing for your lien.
Filing the Lien. After you’ve given the required notices, you’ll need to file your lien affidavit in the real property records of the county where the property is located. Do you have someone available to run to the courthouse, or enough time to mail it in before the deadline? Most attorneys can now e-file the lien much more quickly, and at a lower cost.
Dealing with the Response. After you file the lien, there’s a good chance someone will call you, and I’ve never gotten one of those calls where the caller was happy about the situation. Are you ready do deal with an irate owner, who claims that your lien is late, or is invalid for some other reason? I once had a general contractor call me to claim my lien was invalid because my client didn’t speak English! I told him that it didn’t matter, because I do speak English.
Releasing the Lien. If you’re lucky, the owner or original contractor will offer to pay you, and then you’ll need to release the lien. More often, someone will either ignore your lien or complain that it is somehow invalid or defective. Occasionally, a defect can be cured if you act quickly. Your lawyer will know how to best respond to such allegations.
Filing Suit to Foreclose the Lien. If the lien is not paid, you’ll need to file suit to enforce it. Suit must be filed within one year of the lien for a residential project, and within two years for a commercial property. If suit is not filed in time, the lien becomes unenforceable. Your judgment needs to be prepared so that it includes the right to foreclose the lien.
Collecting the Judgment. Once you have a judgment from the suit, you’ll need to obtain a writ of execution, and send it to the Constable along with instructions to sell the property. Sometimes, as the sale date approaches, you’ll get the first contact from someone representing the owner of the property, claiming some defense that wasn’t raised earlier. In one case, the property owner filed for an injunction to stop the sale of property, just one day before the sale was scheduled. You do not want to be in the position of trying to find an attorney to defend an injunction hearing that is scheduled to happen in an hour.
Best Use of Your Time and Expertise. You’re a busy business owner, with plenty of tasks that have their own deadlines, and require your own specialized knowledge. Just imagine the mess if a lawyer started laying foundations, installing plumbing, electrical or sheetrock, or tinkering with HVAC systems! If it’s worth filing a lien, call your favorite lawyer – because it feels good to Prevail!