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This week’s question comes from a general contractor. The “handshake agreement” is still all-too-common in construction — but it can leave either side of the agreement vulnerable. Construction lawyer and payment expert Michael Johnson weighed in on the strength of verbal agreements versus written contracts.

Michael Johnson
Michael Johnson
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Question: I did not have a signed contract, only a verbal agreement with a client. I completed work on the property. Now that the project is done, the homeowner is only willing to pay the amount that was verbally agreed to. Do I have the option of placing a Mechanics Lien on the property?

Answer: Verbal agreements can be common within the construction industry, but that doesn’t provide a lot of support for situations like this, as it varies quite a bit depending on the particulars.

Construction lawyer Michael Johnson weighed in to say whether or not you can file a lien without a written contract depends on the state and the particular situation.

In 37 states, you generally don’t need a written contract to retain lien rights, but without a written contract you could also find yourself in a difficult mechanics lien dispute.

In states like Delaware, Kentucky, Massachusetts, and New Jersey, a written contract is required for lien rights to hold up — while Arizona, Colorado, Indiana, and Texas only require them for certain types of work.

It doesn’t get any easier to figure out in a handful of states, either. In New Hampshire, South Carolina, South Dakota, and Utah, the laws surrounding these situations are fairly unclear, You may be in the clear without a written contract, but you may not — that’s a lot of uncertainty to deal with.

Regardless of the applicable location, it’s always best practice to have a signed written contract for work provided on any project, of course, and to send preliminary notice when it’s applicable. Even in places where parties are legally able to file a construction lien with just a verbal agreement, having a written contract tempers the possibilities when it comes to legal disputes centered around payment.

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