Understand Mechanic Lien

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I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.
– Alan Greenspan

I love this Alan Greenspan quote because I think it’s especially relevant to mechanic lien laws. As someone whose spent a lot of time researching mechanic lien laws and teaching folks on them, it seems like achieving any sort of general clarity on the topic is an impossibility.

In fact, I’m working on publishing a mechanic’s lien toolkit for material suppliers, and after much thought I’ve decided to open with this Alan Greenspan quote. It is perhaps true that the mechanic’s lien is one of the most misunderstood legal devices.  In this post, I look to identify some misconceptions, and then attempt to explain why the device is so misunderstood.

Misconceptions

In April 2011, we started a FAQs category here on the Construction Payment Blog, which aims to address some of the most common mechanic lien and preliminary notice confusions. Reviewing some of the posts since the launch of this feature, it looks like we’ve really hit on some of the common misconceptions about lien and notice requirements.

1) Notice of Intent To Lien is NOT Always Required Before Filing A Lien
One common misconception is that contractors or suppliers must always deliver a “Notice of Intent” before filing their lien claim. However, this is not required in most states.  It is true that the requirements exists in a few jurisdictions (see list of notice of intent states here), but the general rule is that these notices are not required.

2) Liens Are Filed Against Properties, Not People
When folks order a lien from levelset , they very frequently ask us to file it against certain parties (i.e. the owner, the prime, the sub), and sometimes ask us to exclude other parties.  However, this is a complete misconception about liens, as liens are filed against properties, not people.  Here is a post explaining this in more detail. 

3) You Do NOT Need A Written Contract to File A Lien
It’s a common misconception that you need to have a written, signed contract to file a lien. In fact, this is usually not true.  While a minority of states have written contract requirements for certain types of projects (usually, small residential projects), it is the majority rule that you can file a mechanics lien absent a written agreement.

4) Punchlist Work Does NOT Extend The Time To File A Lien
You only have so long to file a lien from when you finish your work. In most states, the deadline starts to tick when your work is substantially completed, and is not extended by warranty work or punch list work performed on the project.  Many folks try to file a lien thinking their last date of furnishing is later, not understanding this legal rule that applies in most states.

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Why We Get Confused About Mechanic Liens

Mechanic lien and preliminary notice rules vary from state to state, project to project, and are very intricate.  It’s no wonder they are a source of confusion.  Here are three reasons why I think we all get confused about mechanic lien requirements.

A)  Because The Courts Are Confused
One of the main reasons why we get confused about mechanic lien and preliminary notice requirements is that the courts themselves seem confused. Depending on where you are in the country, courts will look at mechanic lien laws and construe them differently for “public policy reasons.”  Some courts liberally construe the law in favor of the lien claimant “because the laws are designed to protect lien claimants.”  Other courts strictly construe the law against the lien claimant because “liens are in derogation of common law and must be strictly construed.”

What’s more, sometimes the courts don’t understand which standard applies, as was recently demonstrated in the Washington case Williams v. Athletic’s Field.  We followed this case very closely here on the Construction Payment Blog (our coverage). For years, Washington appeals courts were deciding lien case after lien case based on differing standards:  Division I said liberal construction, and Division II said strict construction. Unfortunately, a lot of lien claims were squashed based on the Division II strict construction before the Washington Supreme Court finally weighed in on the issue.

We wrote about the decision’s impact on the state’s construction of lien laws in “To Strictly Construe or Not Strictly Construe. Washington Supreme Court Clears The Air.” This is not just an issue in Washington state.  Many states struggle with this very same issue, and it’s one reason why construction attorneys – and especially the construction industry – cannot figure out what’s up and what’s not when dealing with mechanic lien and preliminary notice issues.

B) Gossip In The Industry Circulates Incorrect Law
Laws are different from state to state, and attorneys – for the most part – practice within one jurisdiction.  From an attorney’s perspective, it’s easy to understand that the law in one state is different from another. From the perspective of a supplier or contractor, however, who regularly conducts business across state lines without incident, it’s not quite as clear.

And so when a particular type of notice is required in one state, or some other mechanic lien requirement applies in one state, it is frequently rumored to exist in neighboring states because the construction industry gossips about it, and no one is around to instruct that a particular requirement may be very, very important on one side of the border, but not applicable at all on the other.

C) Too Many Requirements, Too Little Education
Finally, there is a mass of mechanics lien and preliminary notice requirements. Hundreds of different nuances in each state’s rules, and then 50 different state rules. Every year, at least 4 or 5 state legislatures make amendments to the lien regulations.  Let’s be honest:  it’s just too damn complex for anyone in the industry to understand (get help with the LienPilot).

The Legislatures try to make the lien process simple and usable for anyone in the industry, and they are failing miserably. They pass these complex statutes to protect one party or the other, and the everyday contractor, handyman, supplier, or what-have-you gets no education on the statutory requirements, and there’s no place for them to go to get a digestible education about the requirements.

Conclusion

AtLevelset, it’s our mission to make the mechanic lien and preliminary notice patchwork of laws and regulations simple.  That’s why we say that with our service, you can Lien Smart.  We’ve spent a substantial amount of time and resources in deconstructing the lien and notice requirements and putting them at your fingertips.

However, even when you use our resources or any number of resources, you’re still subject to misunderstandings about the lien laws.  They are complex, and they can change depending on any little detail of your project.  This post explains how these misunderstandings happen, and hopefully, armed with an understanding about that, you may be able to find some understanding in the laws themselves!

Summary
Why It's So Hard To Understand Mechanic Lien & Preliminary Notice Requirements
Article Name
Why It's So Hard To Understand Mechanic Lien & Preliminary Notice Requirements
Description
Identifying common misconceptions about lien and notice laws in the USA, and explaining how and why these misunderstandings persist.
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Levelset
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