- What is a mechanics lien?
- Why mechanics liens are so effective
- Who can file a lien?
- Determining the claim amount
- What to do if you miss a deadline
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Deadlines surrounding construction notices and liens are abundant, important, and must be well-managed, since a missed deadline can kill your lien rights on a project.
Since mechanics liens are involuntary (in that the property owner doesn’t agree to encumber his/her property) and can arise with little to no knowledge of the owner whose property is encumbered, there are strict statutory requirements that a lien claimant must meet. These requirements can relate to the form of a notice or lien, the information contained therein, the deadline by which it must be sent or filed, or even the method by which the document was sent.
Even though all of these requirements are crucial, deadlines can cause the most worry for whomever is tasked with managing lien rights at a construction business, since the approaching (and passing) date, maybe even circled on your calendar, feels “real” and deadline pressure is something everybody is familiar with.
While establishing and following a notice and lien policy can help you never miss a deadline (whether for a preliminary notice or a lien itself), sometimes things come up that throw a wrench into the works, and a deadline slips by without the appropriate document being sent or filed. When that missed deadline is the cutoff date to file a lien, it may feel like all avenues for recovery have been cut-off.
And so we want to explore this question a little further and do our best to answer the question: Is there anything a claimant can do about a late lien?
Video: What Do You Do If You Miss Your Lien Deadline?
Did You Really Miss the Deadline?
When it appears that a lien deadline may have passed by, the first thing you should do is to determine whether the deadline has in fact really passed. This may seem little simplistic, but the fact is that mechanics lien deadlines can sometimes be trickier to calculate than it seems like they should be – and occasionally, that means that a deadline may not have expired even though the claimant believes it has.
In some states, the deadline to file a mechanics lien is not based on the claimant’s last furnishing of labor or materials, but on the completion of the project as a whole (or the filing of a notice of completion/cessation). In these states, a claimant may believe a deadline is upcoming or even expired based on their already-completed contribution to the project, when in fact, the project is still ongoing and the ability to file a lien remains open.
A real-world example of this is the lien deadline in California. While a claimant who last furnished labor or material to a project close to 3 months ago may feel like s/he is rapidly approaching the lien deadline, the actual deadline is dependent on the project itself. If the project is large and lengthy, the claimant may have a long time (even a year or more) to file a mechanics lien.
While it’s generally not best practice to keep waiting and waiting while you still remain unpaid on a project just because the lien deadline is still sometime in the future, it can be nice to find out that a deadline believe to be passed is still active, and your lien rights are still intact.
Additionally, some states have two-part or “multiple” deadlines that may still allow lien rights even if a part of the deadline has passed. For example, in Illinois, a lien is effective against all parties (even third-party purchasers) if it is filed within 4 months – BUT, the lien is effective against the original owner (if the property hasn’t been sold) if it is filed up to 2 years from the completion of the project.
Yes, You Really Missed the Deadline – Now What?
So the above is all well and good if there is a chance that the deadline hasn’t yet expired. But what happens if you missed the deadline?
In this case, there are still a few options available. One option is to go ahead and file a mechanics lien anyway. While it is never a good idea to file a lien that you know is invalid or otherwise improper, there is enough gray area around the calculation of lien deadlines (does punch-list work count; were there change orders that called you back out to work, etc.) that sometimes the question isn’t cut and dry.
Filing a lien may prompt payment by bringing the payment dispute to the attention of the relevant parties, even if in an enforcement action the lien may not be effective. Note, however, that filing an invalid lien is a bad idea – and knowingly filing a fraudulent lien can open up the claimant to potential civil or even criminal penalties.
Just because the lien deadline has passed doesn’t mean that you won’t get paid, however. There are other protections built into the law to help ensure payment, and other actions that can be taken to move payment along.
Here are a few potential steps in the absence of a mechanics lien right:
Send the property owner a notice of intent to lien.
Notices of intent to lien can be extremely effective in promoting payment – and just because you may not actually file a lien, it can still be a threat in the arsenal to prompt payment.
Send to collections.
If you have an internal or external collections department or partner, sending a claim to them early in the process with all available supporting information can have good results.
Litigation is generally a last resort, but just because there is no mechanics lien right to enforce, that doesn’t mean that there isn’t a cause of action to pursue: Prompt pay statutes, breach of contract, unjust enrichment, and more can all provide avenues to recovery.
Clearly, establishing and sticking to a notice and lien policy is the best solution to making sure that you are never in the position of missing a critical deadline. However, if a project slips through the cracks and your lien is not filed timely, there are still potential avenues to recovery.
Looking for deadlines for public projects?
Check out our article Bond Claim Deadlines in All 50 States.
Free Payment Rights Advisor Tool from Levelset
One of the most important questions about lien rights concerns whether a potential claimant even has the right to file a lien in the first place. What happens if filing a mechanics lien isn’t an option? What are some other actions to take when you’re having a payment issue? We have a free tool that will help you with these questions. It’s called the Payment Rights Advisor. It only takes a couple of minutes — just answer 5 quick questions about your job, and the Payment Rights Advisor will give you all of your best options, including whether or not you qualify for mechanics lien rights.