Mechanics lien rights are unique to construction. There’s nothing quite like lien rights in any other industry. The term “lien rights” refers to rights bestowed upon construction project participants to file a mechanics lien or bond claim in the event of nonpayment on a construction project.

Read on as we discuss the basics of mechanics lien law and lien rights.

Video Summary of How to Preserve Your Lien Rights

Watch this short video to get a broad overview of Mechanics Lien rights and how you can use them to get paid.

What Are Lien Rights?

A mechanics lien can be filed by unpaid parties who furnished labor or materials on a private (residential or commercial) construction project. Filing a mechanics lien provides the claimant a security interest in the improved property. If the claimant remains unpaid, they can enforce a foreclosure action on the property and receive payment from the proceeds of the sale of the property.

A bond claim serves a parallel function on public (federal, state, county, or municipal) projects. However, when the property in question is owned by the government, claiming an interest in the property is not an option. Instead, bond claims are filed against the surety bond (which is also known as the payment bond), which is a sum of money reserved to protect against problems such as project disruptions or failure to meet contract specifications.

Guide: What Is a Mechanics Lien?

Who Has Lien Rights?

Lien rights are available to some extent in all 50 states, though they are limited by specific rules that vary from one state to the next (see the state-by-state FAQ links below for more info about your state).

Generally, direct contractors, subcontractors, material suppliers, equipment lessors, design professionals (architects and engineers), and laborers all possess lien rights. Typically suppliers-to-suppliers do not have lien rights. However, every state’s lien law is different and there are exceptions to these general rules. It is also important to note that failure to meet the appropriate requirements can invalidate lien rights.

Use the Following Links to Find Out About Lien Rights in Your State

What Affects Lien Rights?

There are a lot of factors that impact whether any single individual, company, or participant on a construction project will have the right to file a lien or not — too many factors to fully cover in this article.

However, here are a few primary questions that must be answered.

Question 1: Is It a Private Construction Project?

Generally speaking, mechanics liens are only available on private construction projects. If there’s a payment issue on a public construction project (either state or federal), then a payment bond claim is usually the appropriate remedy.

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Read more: Types of Construction Projects

Question 2: Was Notice Required?

In the vast majority of states, sending a preliminary notice is a required step in order to maintain your lien rights. If you’re working on a project located in one of these states and you did not send a preliminary notice, there is a very good chance that your lien rights will be invalidated. Even if preliminary notice is not required, it is generally a good idea for sub-tier parties to send one anyway because it can build stronger relationships with clients and speed up the payment process.

Read more: Is Preliminary Notice Required in My State?

Question 3: Did you miss a deadline?

In most states, the lien process involves four steps — really, four documents that sent in order to preserve your lien rights, proactively communicate with the other parties on the project, file the lien itself, and in very rare occasions, enforce the lien filing:

There are strict deadlines associated with each step that are heavily enforced in every state. Depending on your individual circumstances, missing a deadline for any one of these four steps could invalidate your mechanics lien.

Read more: Lien and Notice Deadlines for All 50 States

How Do I Know If I Have Lien Rights?

As you can see from all of the information we’ve presented above, it can be very complicated to answer the question of whether or not you have lien rights.

However, Levelset does have a free tool that will help you answer this exact question. It’s called the Payment Rights Advisor, and all you have to do is answer 5 questions about your job and our payment rights advisor will determine your next steps on how to get paid fast. The Advisor is a self-guided tool will take you through each step of the process, and at the end, you’ll receive a customized report with your best options to get paid.

It only takes a few minutes — give it a try for yourself.

Which State’s Lien Laws Apply to Me?

It’s a frequent scenario in our current marketplace that parties working on a construction project are based out of multiple states. The prime contractor may be based in Nevada, with supplies being shipped from Oregon and Texas, and with subcontractors from Washington, Wisconsin, and Virginia. It’s just a fact of business.

The answer to the question of ‘which state’s mechanics lien laws apply?’ is actually very simple:

The lien laws of the state where the project is located apply. Every time, without any exception.

So, if you’re working on a project in California, it doesn’t matter where you’re based or where anyone on the project is based. It doesn’t even matter if everyone working on the project is from Texas, and the property is owned by a Texas corporation. The property is located in California and therefore, California lien law applies. Period.