Understanding a Lien and How to Effectively File
The first thing to consider is why you want to file a lien. Remember, a lien gives you a right in or over property as security for a debt someone owes you. It essentially establishes a property as leverage while waiting to receive proper compensation.
However, it can also have uncertain consequences on your professional reputation. A lien is not something you should underestimate. So there are a few things you need to know before filing.
Different Types of Liens
There are various types of liens. However, an individual will typically file one of two kinds.
1. Mechanic’s Lien
Mechanic’s liens enable contractors to collect their compensation by encumbering the property they worked on until the debt is satisfied. This kind of lien exists for both real property and personal property. In the realm of real property, it is called by various names depending on the kind of work it may be associated with. Some of these include:
- Construction lien
- Materialman’s lien
- Supplier’s lien
- Laborer’s lien
- Design professional’s lien
Meanwhile, in the realm of personal property, it is often referred to as an artisan’s lien.
2. Judgement Lien Certificate
This kind of lien follows a lawsuit, where the individual can secure the collection of a court-awarded judgment for compensation. It is probably safe to say that if you end up in court, filing a lien should already be part of the game plan.
However, keep in mind that a small claims case in court might be a more efficient and cost-effective way to collect the compensation due, instead of a complex lien process.
Do I have to file a Preliminary Notice?
Preliminary notices, also often referred to as a Notice to Owner, are a key element in the process of filing a mechanics lien. In fact, a standard practice in the construction industry is to send preliminary notice on every project whenever possible. Remember, it is better to have it and not need it, then to need it and not have it.
Needless to say, every once in a while we all forget to submit a notice on a project. In some cases, we have the misfortune of experiencing payment issues on those projects. Sadly, this might be an obstacle the prevents you from pursuing a lien.
Preliminary lien laws vary not only be state, but also by the position on a project that you play. In one state, you might need one depending on your contribution to the construction. Other states might allow a mechanics lien without this documentation.
In the state of Florida, a Notice to Owner is actually a requirement. In the Sunshine State, all parties not directly contracted with the property owner must serve a Notice to Owner (NTO) within 45 days of furnishing labor and/or materials.
The only positions not required by Florida law to provide an NTO include:
- Individual wage-laborers
- Other design professionals.
Does my Mechanics Lien expire?
Typically, liens on construction properties will expire after a certain amount of time. The expiration date will depend on your state. In some instances this period can be as short as 90 days, while in others it can be as long a 6 years. In the state of Florida, the claimant must commence action to enforce or foreclose on the lien within 1 year after recording lien.
Can I Refile my Lien?
A lot of people make the mistake of believing that they can take their time with a lien, because it will hold the property as leverage for as long as they need it. This, however, is not the case.
The next mistake people often make is assuming that they can simple refile their lien whenever it gets close to the deadline to enforce or foreclose the lien. While it is technically possible, it is only ever possible to refile your lien if it is still within in the original lien period. Otherwise, once it’s over there is no going back.
Can I extend my Lien rights?
Mechanics liens are not able to receive extensions in most states. Regardless of permission offered by property owners, lenders, or any other party involved in the construction project, the enforcement of the lien cannot be extended. However, some states do have statutes in place that make exceptions.
Florida is one state that actually allows for an extension of a mechanics lien. However, Florida law requires the claimant provide further services or materials after filing the lien in order for an extension to be applied. If this is the case, the claimant can file an amended lien, and the deadline to enforce is 1 year after the amended lien is filed.
Additionally, Florida legislation also allows for the deadline to enforce a lien to be shortened.
Who must I send my Lien to?
Throughout the process of filing and enforcing a lien, it can feel like there are too many parties to keep track of. If the construction project has a lot of vendors, contractors, agencies and suppliers than it can be a little overwhelming knowing who needs to be provided what information.
The first thing you want to do with your lien is consult the recording office before you file. Don’t forget that every office has unique requirements and procedures. Even proper formatting is important before you send the lien anywhere else. It’s extremely important that a mechanics lien is filed with the correct recording office before moving on to the other parties on the list.
Then, you start to serve your lien. It is critical that you send accurate documentation to all appropriate parties. By sending the information, you are serving the other parties with the lien. Most states require a claimant to serve immediate notice to the property owner. Other states require that you also serve:
- Prime contractor
- Construction lender
A few states also require an affidavit of service. This would verify that you did provide notice to the required parties. This isn’t a bad idea, since there is always the chance that another party insists they did not receive the appropriate notice.
What if I don’t get Paid before the Expiration?
If your deadline to enforce your lien is approaching, you’ll want to take measures to extend the deadline, or to file suit to enforce the lien, which usually requires help from a legal team like the experts used by GreenLight Maximum Recovery.
What if I DO get paid?
If you’ve been paid, you will likely need to release (or cancel) the lien. (Not all states require claimant’s to cancel the lien, but property owners will usually ask for this after the lien claimant has been paid). To cancel the lien, file a Lien Release (or Lien Cancellation) with the same office that recorded the lien. We must stress the importance of the Release of Lien, because if not filed it can be considered slander of title.
For everything you need to know or do with liens, contact a GreenLight Maximum Recovery professional for the best guidance in the construction industry.