Let’s say you’re going into the hospital for something major, something like…brain surgery. Now at the very least, you’d want the doctor performing your operation to have graduated from medical school. Right?
While lien rights management isn’t necessarily a life and death issue, it’s still a legal process that requires a great deal of understanding about a complicated issue. And yet, people in the construction business try to manage their lien rights by themselves all the time, falling time and again into difficult-to-avoid traps that can easily ensnare someone who’s inexperienced with all that successful lien rights management requires.
In fact, as an example of one of these traps, we previously wrote a post warning people about do-it-yourself mechanics lien forms: Why You Shouldn’t Use Do-It-Yourself Mechanic Lien and Notice Forms.
In this article we will discuss three ways you can get burned if you try to file your own mechanics lien.
1. Incorrect Formatting
Each state’s lien rights are a product of that state’s law, and are thusly specific to that state. And so, the lien laws on the books in California will be different than the lien laws passed by Florida’s state legislature, and both states’ lien laws will differ from Texas’, and so on.
But no matter what state you’re in, dealing with lien rights is going to put you in direct contact with, and will force you to rely on, a part of the world that’s not known for their flexibility, common sense, or understanding. Of course we’re talking about state government employees, otherwise known as bureaucrats.
And so, managing lien rights means dealing with state bureaucracy – there’s no way around it. What this means for you is that, sometimes, often times, there are going to be several annoying little rules and regulations that may seem insignificant or even ridiculous, but can still have the effect of invalidating your lien rights if not followed exactly to the letter. How insignificant or ridiculous, you may ask? Consider this:
In Texas, your lien filing must include a 14-word statement, word-for-word, in 10-point, boldface type. In Florida however, your lien claim must include a 66-word statement in order to be filed. California has a required statement comes in at 206 words. Like Florida, California’s statement must be in 10-point, bold face type. Oh, and the last sentence must of that 206-word, California statement must be IN ALL CAPS, except for the web address of the Contractor’s State Licensing Board, which should not be in all caps. Confused yet?
Consider Arizona, which requires all manner of attachments to be filed along with a lien claim, but makes it very, very difficult to do so. Massachusetts requires lien documents to be filed in an exact order and also specifies an exact page margin that must followed. Failing to do either can easily invalidate your lien claim.
We could go on and on. The point is, when you’re dealing with a government office full of government employees, be prepared to go jump through some hoops.
2. Incorrect or Incomplete Project Information
Gathering all of the project information required in the lien rights management process is a huge, industry-wide challenge. It’s just not that easy to do.
But that doesn’t stop each state from requiring lien claimants to include copious amounts of project information in order to file a valid claim. And like everything else in the lien rights process, the project information required varies from state-to-state.
To illustrate this, let’s look at just one piece of project information: the Full Legal Property Description. It’s required in 11 states (incl. Washington DC), not required in 28 others, and the rest have varying requirements that change depending on the state. Confusing, huh? And that’s just one piece of info, one of many that you have to get exactly right to keep your lien rights intact.
Read More: Information You Should Get at the Start of Every Project | Article from Levelset
3. Not Serving the Lien to the Correct Recipients, and/or Not Getting the Lien Notarized
We’re sort of cheating here – sneaking in an extra category to our announced list of three. So let’s just call this 3a and 3b. Category 3a – not serving the lien to the correct recipients – can be a major sticking point that will absolutely invalidate your lien rights if not done correctly. If you’re a subcontractor or supplier in Texas, you must serve the property owner and the prime contractor on the job not later than the 5th business day after your lien has been filed with the county clerk. In Georgia, you must serve the lien on the property owner (or on the prime contractor as an agent of the owner, if the owner cannot be found) within 2 days of its filing. This requirement, like all lien requirements, changes from state-to-state, so be careful.
And 3b – not getting the lien notarized – well, you probably guessed it: notarization is yet another requirement that changes from state-to-state. In California for example, lien claims do not have to be notarized, but lien releases do require a notary’s stamp and signature. Our old friend Texas doesn’t require notarization, but Texas does require another form of attestation in place of a notarization. And some states require notarization plus additional steps. Make sure you get it right in your state!Make sure you get it right in your state!
In conclusion, lien rights are a powerful tool that can make or break the decision between a construction company getting paid the money that’ve earned on a project, and not getting paid at all (or slightly less worse – getting paid very, very late). As powerful a tool as lien rights are, it would be foolish to say that it’s easy. But that’s why Levelset is here!