Notices and Mechanics Liens

I was reading an article recently about how a mistake in a single line of code cost Microsoft over $700 million. That’s a really big penalty for a relatively small oversight. It got me thinking, however, that a similar risk is undertaken every day by folks in the construction industry. As we like to point out every so often, the specific language and other formal requirements mandated to be included on certain notices and liens is very complex. And, like the Microsoft example above, a mistake on a single line can have disastrous results. While it is likely that the majority of mechanics lien claimants will never have a $700 million claim, I would be willing to bet that many will encounter a claim that represents a greater relative percentage of their bottom line.

Wording Is Important on Mechanics Liens and Notices

Failure to include this required language can invalidate a subsequent lien claim. The words used on the face of the documents themselves are of great importance, in some circumstances text supplied by statute is a mandatory inclusion on the notice or lien form. For example, California 3 paragraphs of statutorily mandated text that must appear on every preliminary notice. The failure to include this required language can invalidate a subsequent lien claim, even if both the notice and the subsequent lien were otherwise correct, and were sent to the appropriate parties, within the appropriate time-frame, by the appropriate method of delivery.

The required California blurb contains information that an owners property may be liened, and foreclosed on, even if the owner has paid the general contractor in full if certain actions are not taken to prevent it. It goes on to state that the owner must deliver to the party giving the preliminary notice a copy of any recorded notice of cessation or completion within 10 days of its recordation. The intricacies of the lien law require the exact wording set forth in Cal. Civ. Code Sec. 8202, however. It is not proper to just give the information required, it must be given in the exact wording in order for the notice to accomplish its purpose. When you realize that many other states have similar requirements, you begin to understand why the lien laws seem almost impossibly complex, and difficult for a business to comply with without either outside help, or a full-time notice and lien compliance department.

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The Form of the Wording Is Important on Mechanics Liens and Notices

Unfortunately, it’s not enough to only comply with the specific wording required, however. The specific form of that wording must also be correct. Courts are generally very strict regarding compliance with the statutes that created the lien. To continue with the above example of California preliminary notices, there are hard-and-fast rules regarding how the required language must appear on the notice. The statement must be in bold typeface, and must be a certain size. Further, the statement NOTICE TO PROPERTY OWNER and the phrase EVEN THOUGH YOU HAVE PAID YOUR CONTRACTOR IN FULL must occur in capital letters.

Would a court throw out a mechanics lien claim because the notice didn’t use capital letters and bold typeface if the wording was otherwise correct? Do you want to gamble and find out? Mechanics liens are statutory creatures, so courts are generally very strict regarding compliance with the statutes that created the lien. I know I wouldn’t want to be in the position to find out what would happen in such a circumstance – especially if a large chunk of my company’s profits were at stake.

The Form of the Document Is Important for Mechanics Liens and Notices

Finally, as well as requirements of what to say, how to say it, and how the text should look, there are requirements dictating how the final document must look as a whole. While these requirements may not be contained within the statute – they can be just as important. Some counties have strict requirements regarding a document’s margins if that document is to be recorded. While the statute may be silent as to the document’s final look, if the document is required to be recorded, the requirements for recording better be complied with. If the county fails to record your lien because, for example, there wasn’t a 2-inch margin on the first page and a 1-inch margin on the following pages you could be out of luck, despite the fact that your lien was perfect in every other aspect.

Mechanics lien and notice laws are tricky, but ignorance of the requirements is not an excuse to the courts. Compliance with the minutiae of the law is essential to protect your interests, no matter how draconian it may feel.

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Notices and Mechanics Liens: You Need to be Specific
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Notices and Mechanics Liens: You Need to be Specific
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There are many specific requirements regarding what wording is required on mechanics liens and notices, and how that wording must appear. Compliance with these requirements is critical.
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Levelset
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