For a lot of contractors and service providers, filing a lien is not something they look forward to. Of course, nobody wants to fight for the money they have already earned, especially because these fights can get ugly. No one likes being driven to this extent, but sometimes it is the only option. So when should you file a lien?
A contractor must file a lien within a specific number of days following their last day working on the project. Generally, this period is within about 90 days from the last day on the job. Although in some cases, you may have up to a year.
So how do you know when it is the right time to file a lien? Well, let’s start with why you should in the first place.
Why File a Lien: Making the Choice to Protect Your Business
It is important to remember that a lien isn’t something to be taken lightly. In fact, filing a lien is a strong legal step to take against someone you’ve done business with.
Essentially, this allows for the property to be sold against the owners will, in order to pay for the expenses due to contractors or subcontractors. So, you want to be sure you have a clear understanding of your options, and of the implications of a lien. For one thing, it can impact your professional relationship with the other party. Likewise, taking legal action against project owners may also impact your professional reputation.
That being said, you still deserve to be paid for your work. Contractors or material providers often choose to file a lien when the individual or company in charge of a construction project fails to pay them for the work they’ve done on the project.
Some would advise that you explore other alternatives before following through with a lien claim. At times, it may be more beneficial to come to a compromise with the other party. A third party like GreenLight Maximum Recovery is beneficial to play mediator in these situations so that there are open lines of communication between both parties involved in a dispute. Most times, hearing a different voice can help the conversation flow better. Working towards a resolution that allows both the contractor and the debtor move on. These resolutions may include establishing a payment plan with the help of experienced professionals. Sometimes though, a lien can be the best thing for you.
Keep in mind, a contractor must file a foreclosure suit, which ultimately may result in the property being sold, in order to collect the debt within a certain amount of time. That time-frame is typically within 12 months of the lien filing.
First, Secure Your Right to Lien
Of course, the most obvious step is to make sure you are even allowed to file a lien. Depending on your state, the qualifications can be very different. For example, many states prohibit certain parties from filing a lien.
Furthermore, you will want to make sure you are within the deadline in your state to file a lien. Typically, the deadline is between 90 days to as long as one year from the completion of the project. But don’t wait too long, timing is a crucial factor in being able to collect on your debts. Make sure to check your state laws or contact an expert at GreenLight Maximum Recovery for the specifics on filing liens in your state.
Make Sure to Have a Notice to Owner
Sometimes, the individual filing the lien does not have a direct contractual relationship with the owner of the project. This includes:
- Outside construction agencies
In these cases, you must provide a Preliminary Notice, or a Notice to Owner, to the owner of the project within the established time limits. In most states, you will be required to provide this notice at least 20 days before filing the lien. However, a Notice to Owner in Florida must be served before commencing, or within 45 days of commencing services or providing materials.
Preliminary notices must be provided to:
- Project owner
- General contractor
Furthermore, you will have to provide a detailed billing statement outlining all of the services you or your company performed on the property.
Next, Send a Notice of Intent to Lien
Even once you’ve decided that a lien is your best option, considering sending a Notice of Intent first. Remember, a lien has the power to disrupt, or even halt a construction project altogether.
A Notice of Intent to lien is a way of giving the other party a way out. It is your way of offering up a warning that if payment isn’t made, you, the claimant, intend to file a lien. A notice of intent is just a letter, that does not carry the weight of interfering with the project.
This is an effective way to express to the other party how important it is for them to reconcile the debt. If the other party does not respond, then at least you can say you tried.
Draft and File with Recorder’s Office
Make sure to carefully draft your lien claim to ensure you provide all the necessary information regarding your case. Lien laws can be complex, but it is crucial that you pay attention to the details of the laws in your state. Sadly, many liens are rejected by the county recorder several times before finally receiving approval. Here are some of the most common rejection reasons:
- Improper font or formatting
- Insufficient payment for the filing fee
- Minor typos
- Specific content is missing
Before you even file your lien, it is wise to consult the recording office. The requirements and procedures for filing vary from office to office. Additionally, it’s very important to file your lien with the correct recording office.
Finally, File the Lien
Lien laws exist for a reason. They not only protect the contractors and individuals who provide labor, services and materials, they also protect owners.
In most states, the lien claimant must provide immediate notice to the property owner. If this particular requirement didn’t exist, property owners may never know that a lien has been filed on their property. In some cases, the property owner may not even be aware of the debt in question because they’ve hired a General Contractor who is overseeing all Subcontractors on the project. These Subcontractors can put a lien on the owner’s property even though the owner may not know they exist!
That being said, once you actually file the lien, make sure to immediately notify the appropriate parties to avoid issues yourself.
Additionally, some states require that you also notify:
- Prime contractor
- Construction lender
There are also states that require you to sign an affidavit of service. This document confirms that you did give notice to the required parties.
In conclusion, the question of when to file a lien can be complicated. First, make sure that you have secured your right to file a lien. Are you within the deadline, and do you qualify by the standards of your state laws? Then, make sure to send the proper notice to the appropriate parties. Navigating this timeframe can get confusing, which is why professional help to simplify this process can make a world of difference. The experts at GreenLight Maximum Recovery are available to guide you through this process, saving you stress and getting you paid for a job well done.
Call us today at 1.833.467.5436 to get started.