Being surprised with a lien filing, or even the threat of a lien being filed against your property is never fun. When the lien threat comes from a party you didn’t hire, related to a project that is already complete (or even for which you have already paid), it is even more frustrating – and raises some questions: Can they do this? Is this ok? What’s going to happen?
Upon receipt of a notice that a lien against your property is being contemplated by another party, it pays to examine the situation in light of the following facts and requirements to get a better understanding of how to respond. Another key question that you’ll want to answer asap is whether the potential lien is likely valid or not.
Lien From a Party You Didn’t Hire
While it is frustrating to get notice of a potential lien from a party with whom you never had a contract, it’s generally 100% allowable for that party to file a lien (provided they have complied with the relevant rules and requirements). The general purpose of a mechanics lien is to provide protection to remote parties to ensure payment. So, a party with no written contract with you as the property owner, or no other specific written approval from you related to the labor or materials they furnished to the project, is still generally able to file a valid lien against your property. And conversely, it’s only in very rare circumstances that liens are limited to only parties with a contract directly with the owner.
There are 2 main qualifiers to the above paragraph:
1) The potential claimant must have provided labor or materials to the project
2) they must have complied with any preliminary notice requirements set forth by the laws of the project state, and applicable to their role in the project
Failure to send a required preliminary notice (within the deadline, by the required method, and in the required form) usually results in the forfeiture of lien rights.
Liens After the Project Is Completed
Once the project is completed, you have paid your contractor, and everything appears in order, it can be quite the shock to hear that a mechanics lien may be filed against your property. After all, if the project is over, how’s it possible that a dispute can pop back up?
The answer to this question – and the answer as to whether the mechanics lien filing will be valid – depends on how long ago the project was completed. All states have deadlines by which a mechanics lien must be filed, but the end of a project does not cut off the ability to file a lien.
For many parties, the lien deadline can extend well beyond the completion of the project – how long past the end of the project is dependent on the particular state. For example, in California, a lien must be filed within 90 days of the project’s completion, but in Illinois, a lien may be filed up to 2 years after the project was completed (to recover against the original owner).
This means that after the project is completed, the threat of liens does not go away. If a lien is threatened on your property after the completion of the work, it’s a good idea to check out the lien deadline in your state (applicable to the role of the party threatening the lien) to see whether the contemplated lien will be within the filing deadline.
But, even if the period to file a valid lien has expired, that doesn’t automatically mean that the lien can’t be filed (even though it may be invalid upon filing). While a contractor may not have a legal right to file the lien, there is nothing stopping him/her from filling out a mechanics lien form, bringing it to the recorders office, and recording the lien.
Recorders are generally not gatekeepers that deny recordation to untimely or otherwise invalid documents. This means that if you are looking to sell or refinance your property, even an invalid lien filing may create a challenging situation. If an improper lien is filed, you’ll have to challenge it in court to have it removed, bond it off, or WAIT for it to expire.
The take-aways here are as follows:
1. Parties generally have the right to file a lien even if you didn’t hire them, or specifically approve their working on the project
2. There may be a preliminary notice requirement to preserve their right to file the lien
3. The ability to file a lien is not extinguished upon the completion of the project, but there are deadlines to file a valid lien
4. If the deadline to file a validd lien has passed, a contractor may possibly still file a lien document and cause you problems
5. If an invalid lien filing causes you problems, the problems are solvable – but frustrating