Mechanics liens are an incredibly powerful way to ensure you get paid on a construction project. Once filed, the owner and/or general contractor will try to resolve the payment dispute before the claim is foreclosed. Many times, this involves a promise to pay or an offer to set up a payment plan. But what if payment never comes? Can you re-file a claim after the lien has been removed?
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Mechanics Liens Must Be Released When Paid or Expired
After a mechanics lien has been filed, there comes a time when it must (or at least should) be released. This may be because the claimant has been paid, or because the lien has expired without enforcement being initiated. As has been discussed on this blog previously, some states mandate the release of a mechanics lien in the above situations.
Even in states that don’t specifically mandate the removal of the lien within a certain time period, failure to remove the lien when the underlying claim has been paid, or after the lien has expired with no enforcement proceeding being initiated, may result in court costs, attorney’s fees, and even penalties. Sometimes, however, a claimant may be under pressure to release a lien prior to either of these situations occurring – what happens then?
Mechanics Liens Shouldn’t Be Released Before Payment
It is generally not a good idea to release a lien prior to payment.It is generally not a good idea to release a lien prior to payment. Despite this, however, it is not uncommon for a lien claimant to get some pressure to release a lien for the promise of some future payment. There is clear friction between the paying party and the lien claimant in this situation; the paying party wants the lien released before paying, and the lien claimant wants to hold onto the lien until the payment clears. This makes sense, but can throw a wrench in the works of facilitating payment. Understandably the paying party doesn’t want to expose himself to potential double payment or legal hassle if he pays and the lien is not released. The lien claimant is in an equally, if not more, tough position: if the lien is released and no payment is forthcoming, the mechanics lien claimant is likely out of luck. The claimant could still sue for payment, but all of the security gained by filing the lien (causes of action against more than his hiring party, the option to foreclose, etc.) is gone. Once a lien is released, it’s probably gone forever.
Can Mechanics Liens Be Re-Filed?
Unfortunately for a lien claimant who prematurely released his lien claim on the false promise of an upcoming payment, it is unlikely that the lien can be re-filed. There are multiple reasons for this. One practical reason is that it is likely that the time period in which a lien must be filed has already passed, or in states that require a notice of intent prior to filing a lien, that the deadline will pass by the time a lien would be allowed to be filed. Also, most lien release documents have some statement that the lien release is final and the result of payment. Finally, even without considering the practical aspects, it’s often just forbidden to re-file a mechanics lien.
What should a lien claimant do in this situation. Clearly, the best solution for the lien claimant is to file the release only upon payment of the amount owed (and if payment is by check, after the check clears). The lien claimant really has the leverage in this situation, so it may be able to be used to work for a resolution favoring the lien claimant. If that approach seems like too much of a strong-arm tactic, there is another option. An attorney or escrow service may be willing to hold the lien release in escrow to be recorded pursuant to the receipt of the funds.