Filing a mechanics lien is something your company may consider when a customer account goes into default, but you’ll likely be juggling promises to pay, customer relationships and other complexities when making a decision about whether and when to file. This post talks through some of these issues to determine when the time is right to file a mechanics lien claim.
Legal Time Limits On When You Can File A Mechanics Lien
The first thing to think about here is when you’re legally able to file a mechanics lien claim. You may have some choice about the precise moment when you file, but you don’t have an unlimited choice. The law limits the filing period in every state, and so it’s important to understand the limitations applicable to the project.
Since the laws vary from state to state (and even project-to-project), it’s critical to know the rules applicable to the default account. Remember that your location and your customer’s location does not matter. The project’s location controls, with the project’s state law applicable levelset publishes free state-by-state mechanics lien and bond claim resources.
Every state sets a limit on how long you have to file your mechanics lien claim. Know this deadline because nothing will change it. There are two legal time periods to understand: (i) The earliest you can file a mechanics lien; and (ii) The latest you can file a mechanics lien. Your “choice” about when to file your lien claim must necessarily fall within these two points.
Regarding the earliest point to file a lien claim, it’s a general rule that you can file a mechanics lien as early as you want so long as the work prompting the claim has been done. This doesn’t require that your work be finally or substantially completed (with few exceptions), just that your lien claim is proportional to the work you completed. You cannot, in other words, file a lien claim for work you expect to complete in the future. This is discussed in more detail in this blog post: Can I File A Mechanics Lien Too Early?
Regarding the latest point to file a mechanics lien claim, it is critical to understand that every state sets a limit on how long you have to file your mechanics lien claim, and there is no rhyme or reason as to the selection of this period. Know this deadline because nothing will change it.
Balance Promises To Pay With Customer History and Project Realities
The most common reason why a party will hold off on filing a mechanics lien is because the non-paying customer is promising future payment. This is the old “check is in the mail” excuse at play, except the excuse is a bit complicated in the construction industry where payment sometimes hinges on pay when paid clauses, project delays, and more.
A few years ago I wrote an article titled “Promises To Pay Mean Squat To Your Mechanics Lien Deadlines.” This speaks to the topic in the above section. Know your mechanics lien deadline because “nothing will change it” I wrote about – promises to pay, pay when paid provisions, contractor fund misappropriation, lender payment decisions, etc. – nothing will change your lien deadline.
Therefore, in deciding on the right time to file your mechanics lien you must balance these payment excuses with your immovable lien deadline.
To do so, take your customer’s history and creditworthiness into account, as well as the project realities that may be contributing to the payment delay. If these problems are real and your customer is reliable, it may be worth waiting a little longer (but not through your lien deadline). If these balancing factors do not weigh in favor of waiting, however, you have no reason to delay.
Anticipate Problems And Give Yourself Some Time
Try your very hardest to give yourself a little cushion between the lien deadline and when you start the filing process. When working with county recorders and the technical nature of mechanics lien claims you must plan for Murphy’s law. In fact, I wrote an article a few years ago about this very topic: 3 Things That Can Go Wrong If You Wait Until The Last Minute To File Your Mechanics Lien.
It is possible to get your mechanics lien filed quickly. Last year, in fact, we had someone order a mechanics lien through our service just 1 hour before the recorder’s office closed on their deadline. We got the lien ordered and filed in under an hour.
That was risky for the claimant, however, as much could have gone wrong to delay the process and cause them to miss the deadline. Don’t take this risk. Know your deadline and legal filing period, balance your customer’s situation with the timeframe you have, and make a final decision when you have some cushion.