This sounds like it has an obvious answer. Of course, lien law nuances prove otherwise as there are some scenarios when your right to file a mechanics lien could actually expire while you’re still performing work or furnishing materials.
Scenario 1: You Enter Into Two Contracts On One Project
Last week, the Indiana Court of Appeals confronted a situation where a claimant originally provided architectural services for a company that went out of business. Then, on the same project, another company took over and retained the claimant to continue work. While the claimant’s work was continuous on the project as a whole, the claimant had executed two separate contracts: one for the old bankrupt company and a second for the subsequent company.
When the claimant filed its mechanics lien it was challenged as untimely because it claimed an amount due for work within the first contract, but if the lien deadline counted from the end of that contract (as opposed to the end of the second contract), the lien was clearly not filed on time.
The Indiana Courts of Appeal ultimately dismissed the mechanics lien as untimely in MSKTD & Associates, Inc. v. CCJ Enterprises, LLC, et al., saying:
Where labor or materials are furnished under separate contracts, even though the contracts are between the same persons, and relate to the same building or improvement, the contracts cannot be tacked together to enlarge the time for filing a lien for what was done or furnished under either, but a lien must be filed for what was done under each contract within the statutory period after its completion…
Scenario 2: Punchlist Work Lasts Longer Than The Mechanics Lien Period
Reading about the Indiana case made me think about other scenarios where a mechanics lien deadline could actually expire while the parties were still doing work or furnishing materials. Punchlist and warranty work came right to mind.
The deadline to file a mechanics lien is usually counted from the last date the potential claimant furnishes labor or materials to the construction project. But, what is that last date?
That is a very difficult question, actually, and it’s a question that each state answers differently. We’ve examined this within a number of posts here on the Construction Payment Blog, including this post on the subject: With Lien Deadlines – The Devil Is In The Details.
Sometimes, punchlist work should be included as a day of furnishing, but other times state law does not recognize this work as counting towards extending a lien deadline. The same is true of warranty work or furnishing.
Anyone ever involved in a construction project knows how long it can take a project to go from substantial completion to final completion, and it’s those pesky punch list items causing the delay. Consider this possible scenario: What if the punch list period outlasts the mechanics lien filing period?
In the state of Washington, for example, punch list furnishing is not included in calculating a mechanics lien deadline. The deadline to file a Washington mechanics lien is just 90 days from the last substantial furnishing. What happens if you finish furnishing on January 1st, but you’re bogged down with warranty complaints and punch list work through April.
It’s not an entirely far-fetched scenario, but in this case you would actually be committed to doing work on the project after your lien deadlines have expired.
The Lesson: Pay Attention
The lesson here is to pay close attention to your lien deadlines, and understand, as we’ve written about in the past, that the devil is in the details.
What should you do if your lien deadlines are approaching and you’re still on the project? That’s a tough question to answer, and the answer will likely change on a case-by-case basis.
There are many variables – the relationship with your customer, whether any money is due to you under contract, etc. Ultimately, however, if your mechanics lien deadline is in view and you’re underpaid on the contract, you may have to file your mechanics lien to protect that right or helplessly watch it expire.