We’ve talked a lot about why you should file a mechanics lien, but something I always overlook and fail to mention this: A mechanics lien claim is an asset.
Assigning a Mechanics Lien
Since a lien claim is an asset, most states allow you to “assign” the claim to any other person or entity. Assignment is the transfer of rights held by one party–the assignor–to another party–the assignee. In the case of a mechanics lien claim, a party who has the right to collect on a mechanics lien can transfer or sell that right to another party.
Here are a few things to think about if you are considering an assignment of your mechanics lien claim.
Does Your State Allow You To Assign Mechanics Lien Rights?
The first and most important question is whether your state allows you to assign your mechanics lien rights. Since a lien claim is an asset, most states will allow it to be assigned. There are, however, a few states that do not authorize the assignment of a mechanics lien claim.
If you are not allowed to assign your mechanics lien claim and you try to do so, you may cause some serious problems to the claim. Not only may your claim face invalidation, but you may also get yourself into legal trouble with the other party for assigning a claim you had no right to assign.
Is It Worth Assigning Your Mechanics Lien Rights?
This question is tougher to answer. Unlike the issue of whether or not assignment is allowed, the answer here is not black and white. You can’t look up this answer in a book.
Choosing to assign your mechanics lien rights means you’ll enter into a negotiation. The buyer will offer you some amount of money (which will be less than the full value of the claim) to have the full value of your rights. You’ll need to evaluate the offer and decide if the amount is high enough for you to walk away from the claim.
Since a mechanics lien claim requires foreclosure and legal effort to collect, usually liens are assigned for a fraction of their worth. If you want to sell your lien claims, be prepared to take a significant discount.
Did You Follow Procedures In Assigning The Lien?
Last, but certainly not least, you must pay special attention to the rules governing the assignment of mechanics lien claims. While most states allow claim assignment, there are usually some procedures that must be followed to effect the assignment.
Vincent Pallaci of the New York Mechanic’s Construction Payment Blog just posted an article about assignment requirement in New York: “Assigning a mechanic’s lien in New York? Make sure you record your assignment.”
This article does a great job of highlighting on very important step that assignors and assignees must take when executing an assignment: recording it!
This is an example of just one procedure in one state. If you decide to assign your mechanics lien claim (or to buy a mechanics lien claim) make sure you consult with a construction attorney to do it right.