- 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
Mechanics liens work in many different ways to get claimants paid (we’ve counted as many as 17 different ways a mechanics lien works to get you paid). Much of the time, just filing the lien itself is enough to prompt payment without any further action (or, at least to get the attention of the company that’s not paying you and prompt a payment discussion or negotiation).
In some cases, filing the lien isn’t enough to prompt payment or at least, to encourage the disputing parties to negotiate a mutually satisfactory remedy that solves the issue. Some examples of this can be when there is a dispute over the necessity of the payment, or over the validity of the mechanics lien. In other cases, the deadline to initiate an enforcement action might be fast approaching with no resolution in sight. For these and several other potential reasons, the lien claimant must take the next step and enforce the lien must in order to get what they have earned.
If you’re curious about what it means to enforce a mechanics lien or what it entails, please read on.
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What does it mean to enforce a mechanics lien?
In order to enforce a mechanics lien, the claimant must initiate enforcement or lien foreclosure action. To be perfectly clear: A lien foreclosure action is a lawsuit. As such it needs to be drafted, filed, and served appropriately just like any other lawsuit, according to the rules of the jurisdiction in which the lien was recorded.
Read more: The lien foreclosure process explained
While individuals are allowed to represent themselves, this is rarely if ever a good a idea. And, in most circumstances, a corporation or LLC is not allowed to represent itself in court. This means that if a foreclosure lawsuit is necessary, it’s probably likely you’re going to need an attorney.
For many reasons, a foreclosure lawsuit to enforce a mechanics lien is a complicated procedure. It can involve a large number of parties (some of which you may not know or have ever heard of), there are strict procedural issues, and in extreme circumstances, it can result in the forced sale of property. Last but certainly not least, it can last for a very long time and be very expensive.
Fortunately for the ‘expensive’ part of the previous paragraph, many mechanics lien statutes allow or the claimant to recover attorneys’ fees and court costs if the suit is successful. But keep in mind that this doesn’t kick in until the suit is complete, and in the meantime, you can still be on the hook. (And if your suit is ultimately unsuccessful, then you’ll probably never get that money back).
How to enforce a lien
Since a lien enforcement is a lawsuit, it follows that it proceeds just like a lawsuit does. The foreclosure suit must be drafted (with all necessary parties listed as defendants), filed in court, and served on all parties.
In some states, since the foreclosure action affects real property, a notice called a lis pendens must be filed to put parties on notice that a case affecting the property is ongoing. The mechanics lien statute of the state in which the property is located generally sets out the parties who use be included in the suit. Generally speaking, these are usually the property owner, the GC, the mortgage company, other mechanics lien holders, and any other party with an interest in the property.
After the suit has been filed and served, the case continues as does a general lawsuit: Defendants are allowed time to answer the allegations contained in the complaint, the parties disclose and exchange certain information during the “discovery” process, certain motions may be filed with the court, and, eventually, a trial is held and judgment is reached.
If a mechanics lien claimant is successful, the foreclosure action can result in the judge ordering the sale of the property to satisfy the debt (with the proceeds of the sale disbursed to the parties with an interest in the property according to their priority, with any remainder left to the owner).
The sale of the property is generally accomplished through a judicial auction/sale arranged by the sheriff. Even after the sale of the property, a lien claimant may have to wait some time for payment as there are often redemption periods during which parties may “redeem” the property by paying the amount of the winning bid (plus associated costs).
Needless to say, all of this can take some time. It is common for this type of action (when it progresses all the way to the end) to take several years from the time the mechanics lien was originally filed.
Further Reading: What Happens After You File a Mechanics Lien?
Is this commonly required?
No. Claimants will rarely have to enforce a mechanics lien claim.
The enforcement of a mechanics lien through foreclosure action proceeding all the way to foreclose on and sale of the property at issue is exceptionally rare. There are many reasons that it is uncommon for suits to progress this far, including: expense (especially for the property owner that has to pay all their own costs and potentially the claimant’s), time (the property owner may want to refinance or sell the property), the fact that the suit may result in the sale of the property, and more. Most foreclosure lawsuits are settled long before a trial ever occurs.
It is worth noting, however, that in a handful of states the enforcement/foreclosure action is a required part of claiming the lien itself, and accordingly, is much more common.
While it can take a long time to get to the end, the foreclosure action is what gives the mechanics lien its power – and, in most cases, what gets parties paid without having to actually deal with the foreclosure action itself.