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Short Answer:  Probably not.

Long Answer:  This frequently asked question concerns an issue that has come up conversations with clients before. The client contracted with a property owner to do some work, but the contract was cancelled before work began or soon after work began.  The client’s contract included a “cancellation fee” provision within it, which entitles the client to 10% or 20% of the contract price if the property owner cancels the agreement. The question is: Can a mechanics lien be filed for this cancellation fee?  (See similiar situation:  Can a plumber file a mechanics lien for a “consultation fee?”)

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In most states, a mechanics lien may be filed for the value of the materials, labor or services furnished to a construction project. If you read between the lines here, you may already understand why a cancellation fee doesn’t qualify for a mechanics lien. The reason is because it is not “materials, labor or service” furnished to the project.

The laws are different from state-to-state, but uniformly across the county a mechanics lien cannot be filed for labor, materials or services you did not do!  Under an interpretation of the contract you may be entitled to payment of a cancellation fee, but the fee is tied to work you didn’t do, as opposed to work you did.  For this reason, you are not entitled to file a lien for your cancellation fee.

There may be a little bit of gray area if you did perform some services to the property prior to the cancellation. In this case, the exception will not allow you to file a lien for the cancellation fee. Instead, you’ll simply be able to file a lien for the value of the services actually performed.

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