A mechanics lien is the best tool a contractor, sub, or supplier has to enforce payment. While other remedies are often available, nothing gets a property owner to pay what is due faster than clouding their title or threatening foreclosure. But as we all know, with great power comes great responsibility. The misuse of a mechanics lien can become a serious issue. For this reason, courts punish fraudulent, exaggerated, and improper liens. But proving a mechanics lien is exaggerated is a tough case. When a court does find a lien was exaggerated or fraudulent, criminal law can even come into play. Recently in Georgia, a contractor was slapped with attorney fees after filing an improper lien.
According to the Daily Report, property owner Scott Corwon hired contractor Thurman Ross to construct a $4.5M home and guest house. According to their contract, Ross was to receive no less than $360,000 on the project which would take about a year and a half to complete.
Before the project was completed, the relationship soured. The property owner, unhappy with Ross’ performance, eventually fired the contractor halfway through the project. As a result, Ross filed a mechanics lien on the property alleging unpaid sums for work already performed. Ross also filed several more claims, including breach, unjust enrichment, and a claim under Georgia’s Prompt Payment statutes, which can be found here. For a quick look at the act, check out our Georgia Prompt Payment Law Overview. Crown responded by filing several counterclaims, including breach, slander of title, negligent misrepresentation, fraudulent misrepresentation, and unjust enrichment.
Though Ross did pare down his claims quite a bit before going to trial – he reduced the total of his claims from over $280K to less than $90K- the court found in favor of Corwon. The court actually found that Ross had been unjustly enriched, and awarded Corwon $14,750. The property owner also received $850 for slander of title. The bulk of the award, however, was attorney fees. After filing a $34K lien claim and alleging $50K in other damages, Ross will have to pay $475K (yes, you read that right) in attorney fees. According to Corwon’s attorney, that fell far short of the actual cost of representation.
This is probably an oversimplification, but a $34K lien claim snowballed into a nearly $500K award against the contractor. Lien rights are a powerful tool, but the repercussions for misusing liens can be dire. Before filing a lien on a project, it is important to properly estimate the value of the lien. Your our claim could be worthless, you could end up with legal fees, or you could even end up facing criminal charges for filing an improper lien. While innocent mistakes may not open up risk of serious liability, they may invalidate a mechanics lien. After all, procedure is king when it comes to mechanics liens.