There are lots of ways to screw up a mechanics lien or bond claim – and lose your ability to enforce your payment rights. One of the most common mistakes we see contractors and suppliers make is to misidentify the property owner or the GC on a lien claim. Even more surprising, construction businesses often get their own legal name wrong on the mechanics lien form! Any one of these mistakes can derail a claim and cause you to lose out on a payment.
Using legal names on a contract or mechanics lien form
What’s the name of the company that makes the iPhone? Apple, right? Not if you’re entering into a contract or filing a lien against them. In that case, It’s Apple Inc.
Everybody knows that Walmart is the home of everyday low prices. But Walmart is just their trade name. They enter into contracts under their official business name: Wal-Mart Stores, Inc.
Getting names correct on a construction contract is pretty straightforward. Both parties want to make sure the contract protects them, so everyone has a vested interest in getting the names right. There are multiple people checking and double checking the information on the contract. It’s also a best practice to have a construction lawyer review a contract before you sign.
A mechanics lien form is more prone to mistakes, because only one party is filling out the document – the claimant. You might not even know who the GC on your project is, much less the property owner.
Even your own business name might not be so easy to identify. For many companies, your official business name is just the title on your contractor license, tucked away in your filing cabinet. The name that’s on the building, business cards, and Facebook page is what everybody uses – so why can’t you just put that name on a mechanics lien or bond claim?
Well, because the facts matter. According to the judge, you didn’t have a contract with XYZ Construction. You had a contract with XYZ Construction, Ltd. In the legal world, those are two entirely different things. One has the authority to enter into agreements and conduct business. The other might not.
Why the wrong name will cost you
In construction, there are two primary tools to enforce payment: the construction contract and the mechanics lien. (A bond claim is also a strong payment tool on public projects.)
When it comes to payment, a mechanics lien is the more powerful tool, because it effectively freezes the owner’s financial stake in the property until the lien claim is settled. If you haven’t been paid, pursuing a lien claim is much easier (and cheaper) than taking the non-paying party to court over a breach of contract.
When you file a lien, the property owner will do everything they can to get it thrown out. They will send it to their lawyers and have them pick every detail apart until they find a mistake.
If they find an error that would invalidate the lien, do you think that they ask you to correct it and file another claim before the deadline expires? Probably not. They’re going to sit on it until after the filing deadline, and wait for you to enforce it. Then they’ll ask the judge to throw it out.
Getting the name right for every party listed on a mechanics lien is critical – including your own. You may very well have a valid claim for payment – but a mistake with the business name could invalidate it. Don’t make the job easy for the property owner’s lawyers. Do your research.
How lien claimants get their own name wrong
In one trial over a payment dispute in California, the court invalidated a lien claim because the claimant listed their own name as “Clark Air Conditioning & Heating.” The company’s official business name was “Clark Heating and Air Conditioning.”
It’s incredibly frustrating to lose a payment because of a technicality like that. But the courts don’t care about your feelings. When a judge considers a mechanics lien case, they only care about the facts. And tiny, seemingly trivial differences between an official business name and what everybody calls you can mean the difference between getting paid and going broke.
In a similar case, a company nearly lost their lien claim because of two letters. They filed a mechanics lien, listing the claimant name as “Montgomery Sansome Ltd, LP.” Meanwhile, the name on their business license was “Montgomery Sansome Ltd.”
In that case, the court sided with Montgomery Sansome. But they had to go through the expense of a trial, and pay a bunch of legal and court fees that they could have avoided.
The confusion around the right business name isn’t always the matter of a few letters. We commonly get questions from construction businesses in unique situations. In one, a couple owned multiple business entities, and weren’t sure which business name to use on a lien claim. Another lien claimant was contacted by the property owner, who said that they filed the lien using the wrong name.
LP, DBA, LLC: The business type makes a difference
There are three general business types: sole proprietorship, partnership, and corporation. How a company is organized will affect the name they use to conduct business.
If you are a sole proprietor, your legal business name isn’t just your own. You may be an individual doing business as some type of tradename. You are not “John Smith.” You are not “Kitchen Specialists.” You are John Smith d/b/a Kitchen Specialists.
One contractor in Connecticut – a sole proprietor – lost their lien claim because they didn’t understand the DBA rules. He filed a lien claim as “Greco Construction,” when his legal business name was actually “Brian Greco d/b/a Greco Construction.”
If your business is an organized entity, and not a sole proprietor, you must know what type of entity you are.
Generally speaking, you are either a Limited Liability Company, a Corporation, a General Partnership, a Limited Partnership, or a Limited Corporation. The name of your company includes this designation or an abbreviation of the designation: LLC, Inc., GP, LP, etc.
Tips to get the legal business names right on a mechanics lien
Getting your business name right: Be Consistent
Most companies get in trouble with their company name because they are not consistent.
Contractors often identify themselves one way with the state licensing board, but use a different name to identify themselves in a construction contract or a mechanics lien claim.
You can avoid almost all of the problems by identifying your company the same way, every time. So, be consistent, or be in trouble!
Getting the hiring party’s name right: Double check your contract
A mechanics lien form will ask you for the hiring party name and address. If you are the GC, the hiring party name is the same as the property owner name.
If you are a subcontractor or supplier, the hiring party’s name and contact information will be on your original contract. However, it is important to double check the information before you file the lien claim. Remember: It’s not uncommon for businesses to get their own name wrong.
Getting the property owner’s name right: Do your research
If you are the GC on a project, the property owner’s information is easy to find: it’s on your contract. For subcontractors and suppliers, identifying the legal name of the property owner can be more difficult.
Is the owner an individual, or a corporation? Do they have a trade name? What is the legal name that they are doing business under? Learn how to find the property owner’s information on a construction project.
It’s always a good practice to request a copy of the GC’s contract with the owner at the beginning of a construction project. This makes it easy to find the legal name of the property owner in the event of a payment dispute. (Again, you’ll still want to double check.) Getting a copy of the prime contract is also important for other reasons: The provisions in the GC’s contract can trickle down to affect subs and suppliers, too.
What’s in a legal name? Contracts, liens, and bond claims
Whether you’re entering into a contract or filing a mechanics lien or bond claim over non-payment, getting every detail right is critical. It’s not just a matter of naming the right people. You’ll also need to correctly identify the property, claim the correct amount, and more.
At Levelset, the Scout research team combs through documents, searches government websites, reads property maps, and even calls local coffee shops to help construction businesses get the details right on their notices and lien claims. That’s how important it is to dot every “i” and cross every “t” on legal paperwork. It can be a lot of work, but it’s worth it after each contractor’s claim gets paid.
Of course, getting someone’s name right sounds pretty easy – especially when it’s your own name we’re talking about. But legal business names can be complicated and confusing. Whenever you’re using a legal process to protect your payment – whether a construction contract or mechanics lien – make sure you know exactly who is responsible. If a payment dispute needs to be resolved in court, the information in these documents can make or break your case.