Am I in my right to apply payments to customer outstanding balance who sent me payments for a recent lien?

2 months ago

Hi, I need help with a problem. I have a customer who we have at least 11 jobs that we completed totaling $57,405.51. Six of the jobs were completed but I have not receive payment for and those jobs are over 90 days old. One Job I have already lien and two others I have sent intent to lien. The customer sent me a payment of $16,784 which covers one of the lien properties and two properties with intent to lien. The customer wish for me to remove the lien and retract the intent to liens. I rather apply the payments toward the oldest charges and to keep the lien on the property until the customer settle up the old debt. I am within my rights to do this?

Senior Legal Associate Levelset

That’s a good question, and I’m sorry to hear you’ve had so much trouble recovering payment here. Before getting going – I should note that I’m not able to advise you on how to proceed with your situation. But I can provide information that should help you come to your own determinations. With that in mind…

Ultimately, what debts a payment can be applied to will depend very heavily on the pretenses on which the payments were given. If a customer specifically earmarks payments for one job, or earmarks payments for one lien, then a lien claimant probably can’t apply those payments to whatever they want. But, if payment is given without any indication as to what the payment is made for – there may be flexibility.

Put in other words: A lien claimant likely cannot promise to release a lien if payment is made, then upon receipt of payment for that lien, claim that the payment is being applied to some other debt and refuse to release their lien. Further, if a customer states that payment is for a specific debt, a lien claimant likely cannot apply that payment to some other invoice or project. In a situation where payment wasn’t specifically earmarked for a certain job or payment wasn’t made in exchange for the release of a specific lien, then a lien claimant might be able to apply payment to whatever outstanding debt they wanted.

Further, keep in mind that if a lien is paid off for one job, that lien should generally be released. Refusing to release a paid lien due to debts on some other job might work, to some degree, as a negotiation tactic – but when a lien is paid and the claimant still refuses to release it, that claimant could open themselves up to liability.

For more information about lien releases for partial payments and timing out a lien release, these resources should be valuable:
(1) I Received Partial Payment — What Should I Do With My Mechanics Lien?
(2) Construction Lien Release Process: the Timeline is Tricky

I hope that was helpful information! If you need advice on how best to proceed in your situation, consulting a local construction attorney might help – they’ll be able to review all relevant documentation and communication and advise on how best to move forward considering your specific circumstances.

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