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I have a subcontractor conditional final waiver of lien. I am wondering my rights to file

I operate in Indiana. The work performed was in Kentucky. Terms of payment were net 30. Our invoice was sent to them on 3/2/2020. To date, they owe us over $18,000. Given the current situation of the economy, should I be understanding and give them more time considering they are waiting to hear back from SBA on the PPP loan? If not, do I file in IN or KY?

1 reply

Apr 21, 2020

Knowing when, exactly, to proceed with payment claims can be a challenge. And, it's ultimately up to every business to decide for themselves how to proceed with recovering their own debts. With that being said - it's crucial to fully understand the options on the table before deciding on whether or not to use them, and when.

Understanding Kentucky mechanics lien rights

First: The mechanics lien rules of the state where work was performed will apply. So, if work was done in Kentucky, then the Kentucky lien and notice rules must be followed. Kentucky's deadline for filing a mechanics lien is 6 months from the last date when labor or materials were provided to the project. Once that deadline comes and goes, a mechanics lien will no longer be an option. So, that timeframe must be taken into account when making the decision on how to proceed. What's more, Kentucky also has a Notice to Owner requirement before a lien can be filed. On most jobs, a Notice to Owner must be sent within 75 days of last furnishing labor or materials to the job. So, it's crucial to send this notice to keep all rights on the table. And, obviously, preserving those rights doesn't necessarily mean you have to use them.

Deciding whether or not to utilize mechanics lien rights

It can be hard to decide whether or not to utilize lien rights, especially when you have a good relationship with your customer. As briefly discussed above - it's a good idea to do what's necessary to preserve those lien rights regardless of whether you actually intend to use them. Taking a payment recovery tool out of your arsenal early on does a disservice to your business. On the other side of that coin, though, nothing stops you from discussing the matter with your customer, explaining why the notice is being sent, and coming to some form of payment agreement that stops a lien from being filed. There are plenty of ways to work with a customer to come to a payment agreement without having to file a lien, as Levelset discusses here: Don’t Want to File a Mechanics Lien? Here Are 5 Other Options. Mechanics liens create a lot of security since the debt is literally secured by the project property - so if you're going to forego using your lien rights, it's probably wise to agree to some other form of security like the options discussed in that article above. And, of course, if it's not possible to reach an agreement to avoid using lien rights - it may eventually come time to make the hard decision to file a Kentucky mechanics lien. You can learn about that process here: How to File a Kentucky Mechanics Lien – Step by Step Walkthrough.

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