Nobody likes mechanics liens, but they get the job done. They’re a pain in the butt to file (unless you’re using Levelset,of course), and they often require a notary. Plus, the surrounding notices and deadlines have claimants feeling like they’re jumping through hoops. All this work, just to secure payment that you’ve already earned.
But a mechanics lien will definitely sting on the receiving end, too. Since liens are so powerful and carry such steep consequences, a lien recipient’s first inclination is often to fight back (even blindly). Read on for a brief discussion of what to do when your lien filing is challenged.
The First Reflex Is Often to Fight Back
Often, property owners are removed from the day to day goings-on of a construction project. In fact, it’s pretty common for a property owner to not know all of the companies that are working on the project in the first place. Because of this, they’re often oblivious to any payment disputes that may be present. So it should come as no surprise that an owner’s (or their GC’s) first response to a lien filing is to call BS.
Sometimes these challenges make valid points, like pointing out an exaggerated lien or denying that a change order was approved. Other times, a lien is challenged with no real basis at all.
All that being said, having a mechanics lien challenged is no laughing matter. Even those challenges that don’t have any merit should be given their due respect. Here are some things to consider when your mechanics lien is challenged.
What NOT to do
Here’s a list of bad ideas that you definitely should not do when your lien is challenged:
- Make angry phone calls to the owner or GC
- Fire off texts telling them what jerks they are
- Make threats
- Ignore the challenge and go about your day
Your response to a lien challenge really depends on how the lien was challenged and the circumstances of your situation. Honestly, when a lien is challenged, it might time to bring in legal counsel. This is especially true if the party challenging your lien did so through their lawyer.
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What to do if your lien is challenged
Before deciding how to respond to a mechanics lien challenge, here are a few questions to think about:
Question #1: Why is the lien being challenged?
Lien laws are complex. They’re often strictly adhered to, meaning even the smallest error could create major issues. The following are some of the most common reasons that liens are challenged:
- A deadline may have been missed.
- Preliminary notice was required prior to the lien filing, but wasn’t sent.
- The amount of the lien is in dispute.
- The lien doesn’t contain a legal property description.
Of course, these are just a few of the many reasons that liens get challenged. Reading the communication that is sent in response to a lien is obviously the most effective way to know why the lien is being challenged. But if the letter came from the other party’s attorney (or even if not), it’s a good idea to consult an experienced construction attorney when a lien is challenged.
Question #2: How is the lien being challenged?
Typically, a lien will be challenged through a formal letter or request, often from either the property owner or the GC’s attorney. The letter usually highlights what they believe to be wrong with the lien, and often that will be one of the reasons from the above list.
Such a letter also often asserts that, if the lien is not immediately released, legal action will be brought against the claimant. It’s worth noting that in some states, such as Louisiana and California, if a lien is improper and the claimant refuses to cancel the lien, a claimant could become liable.
If an owner or GC is “challenging” a lien through angry calls, texts, or emails without specific reasoning for their challenge, this type of behavior, while annoying, does not constitute a true legal challenge as outlined above.
Question #3: Does a challenge to my lien mean it’s improper?
A challenge to a filed mechanics lien does not necessarily mean it’s improper. However, while challenging a mechanics lien is often the first response of an owner or GC after a filing, their challenge could have a valid basis.
But still — threatening letters regularly make exaggerations and take liberties with the laws and requirements surrounding mechanics liens. Just because you’ve received a letter from an attorney does not mean that a mechanics lien is invalid. But that doesn’t mean every challenge is made without reason.
The Bottom Line
There are a number of available options if a lien is challenged.
First, a claimant can usually continue to negotiate with whomever owes them money. We see this pretty regularly — a lien claimant often gets a formal looking challenge to a mechanics lien while, behind the scenes, negotiations to resolve the dispute are ongoing or even nearing a deal. However, sometimes a letter from an attorney that challenges a lien states that all communication must go through the attorney.
The safest bet, is to consult with an attorney about the challenge, preferably a construction attorney familiar with lien laws. Mechanics lien laws are complex, and even good attorneys can get turned around if they’re not familiar with lien laws. But regardless – there is no substitute for the advice of an attorney in a situation like this, especially if a lien challenge threatens immediate legal action (and they often do).
Remember, this article if for informational purposes only and is not a substitute for an attorney. There will be a number of available options if a lien is challenged, and these are just a few of the more popular ways to deal with a challenged lien. Consulting an attorney will provide more clarity on available options as well as advice on how to proceed.
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