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So you’re considering filing a mechanics lien to recover payment: Smart move! Mechanics liens are incredibly effective at getting you paid. But you’ll likely come across legal terms that can make the process feel more complex than it really is. You may have read that you have to perfect your lien in order for it to be effective. So what does it mean to “perfect” a mechanics lien? Here, we’ll break it down – and explain some of the other legal jargon you’ll come across in the lien process.
When a construction business submits or files payment documents – pay applications, notices, waivers, liens, and more – they must meet requirements and deadlines that can be quite complicated. Disagreements or misunderstandings about these documents can easily lead to a payment dispute.
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Legal jargon in the mechanics lien process
Navigating the complexity of getting paid in construction is hard. It can be even more work when there are multiple parts to a single document. When you add the issue of legal terminology, it can be a headache that some construction companies don’t even want to deal with. But they slog through anyway, as best they can, because they know that they need to. After all, important. When it comes to mechanics liens, there are a few terms that can cause confusion.
The first bit of jargon is in the definition of a mechanics lien: It is an involuntary security interest in real property. The related terminology follows the general terms related to security interests in general.
Some of the terms you’ll likely hear in the mechanics lien process are attach, perfect, and enforce. These legal terms all have specific meanings and are very important in determining things like the lien’s priority, or even its validity.
Date of lien attachment
The date of attachment is generally used to determine the lien’s priority in the event there are competing claims. A competing claim may be from a mortgage on the property, or from another contractor’s mechanics lien filing.
For mechanics liens, the date of attachment generally relates back to the start of the project as a whole. This means that all mechanics liens are of equal priority.
How to perfect a mechanics lien
Legally, a mechanics lien generally attaches to the property upon the initiation of work. But in order to actually encumber the property, the lien must be perfected. And the way to “perfect” it is to follow the steps to file a mechanics lien.
Technically, there is one step in the process that specifically perfects it. A claimant can perfect a mechanics lien by recording the lien in the appropriate recorder’s or clerk’s office. And, where state law requires it, by serving the lien on the interested parties.
But not just anyone can record – and perfect – a mechanics lien. It’s important to remember that, in most cases, you do not automatically have the right to file a lien. In order to have the legal right to perfect a mechanics lien, you must follow the required steps. Every state has their own requirements, like sending preliminary notice and/or a notice of intent to lien. If you skipped any of the required steps, you can lose your ability to file a lien claim.
Perfecting vs enforcing a mechanics lien
Many contractors and suppliers get confused by the terminology. They think that “perfecting” a mechanics lien means enforcing it in court.
The perfection of a lien is simply the appropriate recording of the document. Enforcing a lien, however, is step in the process after you perfect the lien.
In most cases, perfecting your mechanics lien is the last step you’ll need. A lien encumbers the property – effectively freezing it. As a result, it puts enormous pressure on the property owner to pay your claim. Enforcing a lien claim in court is only required in a small fraction of cases.
A lien’s legal lifecycle: Attach, perfect, enforce
Security instruments all must go through specific steps to complete their “lifecycle” – (1) attach, (2) perfect, and (3) enforce. This is true for any security instrument, whether UCC liens, mechanics liens, or something else.
In terms of the mechanics lien claimant’s actions, attachment is automatic based on the work performed. Perfection is the recording (which requires action). And enforcement is initiating an foreclosure proceeding prior to the lien’s expiration.
Perfection is critical
In order for your mechanics lien to work to get you paid, you must perfect it. But your lien form itself must also be perfect. Claimants make a lot of mistakes on their lien claims. Even simple mistakes can cause the recorder’s office to reject the lien or the court to invalidate it.
Follow the steps in the mechanics lien process to the letter, and pay attention to the details.
Then, if someone asks whether you perfected your lien claim, here’s some legal jargon you can give back to them. “The lien was recorded and served appropriately and according the the statutory requirements. Now pay me.”