The following question pops up frequently on construction projects: “Can I file a lien even though I don’t have a written contract?” And, as with most of the questions we get about mechanics lien rights, the answer is: it depends.
Handshakes and verbal agreements are common in the construction industry, but finding answers on how lien rights apply to contracts that are not written and signed can be a challenge. We’ve collected the relevant information from all 50 states’ mechanic’s lien statutes and compiled it here to make this question easier to answer.
First things first: Who can file a mechanics lien?
This question comes from property owners and construction professionals alike. Owners want to know if a contractor, subcontractor, or supplier has the right to file a lien — especially when someone they’ve never heard of filed a lien on their property! Construction pros want to know their recourse options if they’re having trouble collecting payment.
The basic rule is that anyone who provides labor or materials to a permanent improvement on real property has the right to file a lien. Of course, rules are made to be broken — and this rule doesn’t apply in all situations.
But in general, if you’re a property owner: Anyone who works on your construction project or supplies building materials or equipment can file a lien if they don’t get paid. It doesn’t matter if they have a contract with you, or if they have ever met you. Maybe the general contractor hired them, or maybe a subcontractor did. They don’t need to have a contract with you — they just need a valid contract with someone on the project.
But that begs the question: What constitutes a valid contract for the purpose of filing a mechanics lien?
State rules for contracts & mechanics liens
Mechanics lien rules vary widely from one state to the next, so it’s necessary to understand your state’s lien laws in order to secure your lien rights. When it comes to whether construction contracts must be in writing or not to qualify for lien rights, some states strictly require a signed contract, while others are more flexible.
States typically fall into one of the following 4 categories when it comes to improvement contracts and lien rights:
- States where written contracts are explicitly required to secure lien rights
- States where written contracts are not required to secure lien rights
- States with rules on contracts based on the amount or type of work
- States that don’t specify types of acceptable contracts
The maps and discussion below provide a general guide as to whether a contract type affects mechanics lien rights for contractors, suppliers, and other construction parties.
Most states don’t require a written contract for lien rights
- New Mexico
- North Carolina
- North Dakota
- Rhode Island
- Washington DC
- West Virginia
In most states (37 of them), contractors and suppliers are generally allowed to file a lien even if they don’t have a written contract. In other words, the contractor could be working off on a verbal agreement, and yet still have the ability to file a lien claim.
Even though these states may permit a construction business to claim a mechanics lien even without a written contract, it is best practice to have a signed written contract for work provided. Documentation is crucial in the construction industry, and many times, what a party has documented is more important than what actually happened!
These statutes typically use language like “for the specific contract or agreed upon change” (New Mexico) and “contract means an agreement that provides for all or part of a work or improvement” (California) to describe contracts, and do not explicitly require that contracts must be written.
However, as explored with a situation in Ohio, not having a written contract can really clutter issues and create a sticky mechanics lien dispute.
These states typically permit parties with verbal, oral, or even implied contracts to claim lien rights. Be sure you familiarize yourself with the specific rules in the state you’re working in. Click on your state in the list to view each mechanics lien statute in full.
6 states prohibit mechanics liens without a written contract
In these states, a written contract between the party providing work and the hiring party is an absolute necessity in order to secure lien rights. Contractors, suppliers, and other parties can only claim a mechanics lien for funds mentioned in written contracts. If it’s not in writing…then you don’t have lien rights! Simple as that. Here are the states that require a written contract to file a lien:
*In New York, failure to have a written contract on a home improvement project may block the ability to enforce a filed lien.
**In Texas, the prime contractor must have a written contract with the owner(s) in order for anyone on the project (contractors, subs, suppliers, etc.) to file a mechanics lien against residential homestead projects. Further, architects, engineers, surveyors, and landscapers need to have written contracts for all projects.
- Note: For Texas projects that start on or after 1/1/22, design professionals will no longer need to have a written contract with the property owner to have lien rights.
Texas rules for mechanics liens and notices are subject to major changes in 2022.
The information on this page has already been updated to reflect the new rules.
3 states require a contract for certain amounts or type of work
There are three states — Arizona, Colorado, and Indiana — that require written contracts sometimes, depending on the value of the work being performed, or the type of work being performed. Contract requirements in these states have more to do with the type of work being provided or the type of project, rather than with the actual form of the contract itself.
- Arizona: For owner-occupied residential projects, only claimants who have a written direct contract with the owner will be entitled to file a mechanics lien. Further, on all projects, design professionals will only have mechanics lien rights if they have a written contract with the owner or have a contract (verbal or written) with someone else who has a written contract with the owner.
- Colorado: Colorado’s lien statute is relatively straightforward, and the written contract requirement is based on the contract price. The relevant part of the statute states that if the amount to be paid exceeds $500, the contract must be in writing in order to claim a mechanics lien. Any agreement for work or materials below this amount is not required to be in writing to file a valid mechanics lien claim.
- Indiana: Indiana’s approach to this issue is a bit different, as they rely on who the property owner is. If the property is owned by a public utility, municipality, joint agency, rural electric membership corporation, rural telephone cooperative corporation, or not-for-profit utility, a written contract is necessary to secure lien rights. Also, a copy of the contract has to be filed and recorded in the recorder’s office within five days of the execution of the contract.
5 states don’t have clear laws
Some state laws don’t make this question easy because they aren’t specific about whether or not contracts must be written in order for a contractor or supplier to file a lien. Oral contracts are typically valid so long as they adhere to the state’s rules on contracts, but companies should consult with a lawyer if they questions about a specific situation and don’t have a clearly defined written contract.
FAQs about written contract requirements
Here are some example questions and answers about the “written contract” requirement in some of these states.
Can a subcontractor file a lien if they don’t have a contract with the owner?
This question was asked about a situation in Arizona, but the answer will apply everywhere! Someone asked, Can a subcontractor file a lien in AZ…if he has no written contract? Can he file a lien if the single-family residence is occupied, and he has no contract with the homeowner?
This question is interesting because it presents a twist to the “written contract” discussion. The question here is really about “privity of contract,” and not whether the contract is written or verbal. This question appears to come from a homeowner who didn’t contract with a subcontractor at all. As such, the subcontractor doesn’t have a “written contract” with the owner. In fact, the subcontractor doesn’t have any contract with the owner — neither written nor verbal!
However, presuming the subcontractor has a contract with the general contractor (or someone!) on the job, the subcontractor will have lien rights in this case. And since this project is in Arizona, and we know Arizona doesn’t require contracts be in writing, this sub would have lien rights even if the contract was just an oral agreement.
A very similar question was asked about a Texas situation…and as we saw above, Texas does require contracts be in writing. However, presuming that the subcontractor on the project has a written contract with someone, they can still file a lien even if they don’t have a written agreement with the property owner.
What exactly is a contract? Is a purchase order a contract?
Another important question that needs to be answered is what constitutes a “contract?” You have some stuff in writing, but is it actually a “contract?” Where is the line drawn?
This is a common question and one that came up on our Expert Center when a material supplier asked, Do purchase orders count as a contract? To answer this question, the construction attorney went into the legal requirements to form a contract. These can be really sticky requirements, and it’s not always clear. Ultimately, the answer concluded, a purchase order may ultimately create a contractual relationship between the parties if all the required elements are present.
So, even in states that require written contracts…something you have in writing may qualify for as the “contract,” even if it is not explicitly marked as a contract. As long as the essential requirements for a contract are met, even a string of text messages could potentially result in a binding contract.
What if extra work or changes aren’t in writing?
Another common question that arises in this “written contract” category is about changes to the work. It’s super common that changes to the contract and to the work occur throughout the course of a construction job. And with the speed of construction, these changes frequently don’t get neatly documented. Extra work will get approved orally, or a change may be demanded without even agreement! What happens then? Do change orders need to be writing for lien rights, too?
This came up on our Ask an Expert Center with this question related to a Texas project: Can I file a lien on extra work for which I don’t have written authorization?
The answer provided, and the general answer to provide is that if the written contract requirement is satisfied and there is a written contract in place, changes and authorized work may still be subject to a lien, even though a second contract wasn’t executed. The changes themselves, in other words, are actually done under and within the original contract.
Don’t chance it: Get the contract in writing
It’s always a good idea to get a written contract to ensure a smooth payment process and to minimize risk. Regardless, in several states, oral agreements (or even implied ones) are more than sufficient to secure lien rights. This article is meant to give a general overview of the requirements as a jumping-off point for those curious about whether or not it is necessary to have a written contract in order to secure mechanics lien rights.
- Construction Contract Documents | A Guide to Common Contract Parts
- Beware of Certain Clauses – Construction Contracts
- No Lien Clauses: A 50-State Overview for the Construction Industry
- Does a Mechanics Lien Cause a Breach of Contract?