In general, as a project participant on a construction project, you can file a mechanics lien. This process of filing a mechanics lien secures the right to file a claim against the property in the event of non-payment.
If filing a mechanics lien does not spur payment, you have the option to initiate a lawsuit, but this article will discuss a better option than initiating a lawsuit. You can instead send a Notice of Intent to Foreclose which is not only a powerful collection document, it also helps the claimant avoid having to file a lawsuit to enforce the lien.
Mechanics Liens – Not Ideal, But Sometimes Necessary
Nobody likes liens, but if you’re not getting paid on a construction project – money that you’ve already earned – then sometimes, filing a lien is necessary. When it gets to the point that a lien is filed, this significant step is usually enough to get the attention of the interested parties on the project and to prompt payment. However, if filing the lien does not prompt payment, then the claimant always has the option to initiate a lawsuit to enforce the lien, which is also known as a foreclosure action.
We already know that everyone hates liens, but guess what? Everyone REALLY HATES litigation. Initiating a foreclosure action is not very attractive because it is costly and risky.
But don’t worry there is an option that may help claimants avoid court. It’s a document, a “warning letter” called a Notice of Intent to Foreclose.
What Is a Notice of Intent to Foreclose?
A Notice of Intent to Foreclosure is a cost-effective way to provide one last warning prior to initiating a lawsuit. It is a voluntary warning letter that clearly states that if payment is not made then the claimant will initiate a lawsuit. And since we already know how much everyone hates lawsuits, sending a Notice of Intent to Foreclose can be very effective at prompting payment (so that a lawsuit can be avoided).
Sending a Notice of Intent to Foreclose is a cost-effective tactic because it adds pressure on property owners due to the threat of pending litigation, on top of the lien filing which is already on their property. This pressure on property owners gives more incentive to the interested parties to satisfy the lien. This also avoids litigation costs for both sides – by avoiding legal costs associated with litigation such as court costs and legal fees.
Best Practices from Levelset
So, you had to file a lien on one of your projects, and you may be wondering, ‘what happens next??’ Read this article for some help.
When Is a Notice of Intent to Foreclose Used?
This warning letter is optional. That being said, if you choose to send a Notice of Intent to Foreclose, the main requirement is that there has to be an existing, filed mechanics lien to foreclose upon. Or in other words, sending an optional Notice of Intent to Foreclose has to come after a mechanics lien has been filed.
Then, there are other deadlines on your mechanics lien so the best practice is to send the Notice of Intent to Foreclose well before the lien’s deadline-to-enforce date.
So, to recap, the window of time to send a Notice of Intent to Foreclose is after a lien has been filed, but well before the deadline to enforce the mechanics lien. And you’ve got to be careful here because these deadlines vary greatly from state-to-state and according to several other factors.
One of the most important questions about lien rights concerns whether a potential claimant even has the right to file a lien in the first place. What happens if filing a mechanics lien isn’t an option? What are some other actions to take when you’re having a payment issue? We have a free tool that will help you with these questions. It’s called the Payment Rights Advisor. It only takes a couple of minutes — just answer 5 quick questions about your job, and the Payment Rights Advisor will give you all of your best options, including whether or not you qualify for mechanics lien rights.
Where Can I get a Notice of Intent to Foreclose?
Sending the Notice of Intent to Foreclose well will create a more effective threat that you mean business and you will file a lawsuit if the lien is not satisfied. Since no one wants to go through the painful process of litigation (except for lawyers, maybe).
If you need a Notice of Intent to Foreclose, you can use Levelset’s pay-as-you-go document service to order one for yourself. Or, you can talk to us to find out how we might be able to help you, not just with this document (or with any one document), but rather, with getting paid the money you’ve earned on your projects in general. At Levelset, our job isn’t to just send documents or file liens — our job is to help you get paid.