Mechanics liens can be tricky, even for the most experienced contractor. It is important to make sure you keep track of certain deadlines in order to preserve your right to place a lien on privately-owned property under construction for which you have provided labor, service, equipment, or material.
The first step is to provide a “20-day preliminary notice” – sometimes referred to as a “pre-lien” – to the owner, the direct contractor and the construction lender if there is one. Service of a preliminary notice is a necessary prerequisite to the validity of any mechanics lien or stop payment notice. Disputes usually focus on:
- Whether all necessary parties were served;
- Whether the form and content of the notice met statutory requirements; or
- Whether the notice was properly served.
The preliminary notice for private works must be given within 20 days after the claimant has first furnished work or materials on the work of improvement. This means that if you serve it late, then you are limited to a mechanics lien only for work performed within 20 days immediately preceding service of the notice and continuing through completion of work.
What happens after you served your pre-lien? Hopefully you’ll get paid, and most likely you’ll be asked to sign a release of your claim upon payment. But if you don’t get paid, then you’ll need to record a mechanics lien, which must be recorded no later than 90 days after completion of the project if no notice of completion is recorded, or 30 days after recordation of a notice of completion if you are a sub-contractor (60 days if you are a direct contractor).
So now you’ve recorded your mechanics lien on the property, what next? At this point, most contractors have gotten the attention of the owner or the direct contractor and started negotiations to get paid. These discussions can often drag out for several months. What most contractors don’t realize is that they have only 90 days after recordation of their lien to file suit with the court. This time frame is not extended or “tolled” just because you were in settlement discussions to get paid. After 90 days, you can be forced to release your lien and you will have to pay the owner’s attorney’s fees if you refuse and the owner has to file suit. You can still sue to get paid for the work or materials you provided, but you won’t have the leverage of a mechanics lien.
Experienced counsel can assist a contractor to navigate through this complicated area of the law to avoid costly mistakes and preserve your legal rights.