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Mechanics lien rights in Washington DC

Florida

We have been hired by our customer, to supply materials, and our customer was hired by his customer. I understand that in DC the sub of a sub has no right to Mechanics Liens. Can you tell us what the best way to protect ourselves will be? This job is $900K+

4 replies

May 11, 2021
Is this project in Florida? Your inquiry has been directed to the Florida lawyers forum.
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May 11, 2021

No, this project is in Washington DC. We are located in Florida. Our customers' address is California, but they have an office in Florida.

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May 11, 2021
OK. Lien rights are determined by the laws of the jurisdiction where the property is located so you should consult with a member of the DC bar who handles construction cases about that. If you have no lien rights as a material supplier then I would recommend that funds to pay your contract be placed in escrow and paid to you by the escrow agent on an agreed basis. Expect to pay one-half of one percent (.5%) fees for such services. Lawyers and title insurance companies typically provides escrow services. The trick is getting your customer to come up with the entire value of your contract. An alternative is to require payment in advance of shipping each order. Otherwise, with no lien rights you are relying on the credit worthiness of your customer.
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May 13, 2021

Raymond provided a couple good alternatives above. Without a mechanics lien right, other processes or agreement must be used in order to protect the value of the materials supplied. 

In Washington D.C., lien protection is limited to those parties who contract wither with th eproperty owner or the direct contractor. 

Other than the ideas presented by Raymond, you may also be able to explore creating a joint check agreement with your customer and the party who is obligated to pay them. Joint check agreements are contracts whereby one party agrees to (or gives permission to) make payment in the form of joint checks (checks made out to two parties). This type of agreement can be used to provide a little more protection to ensure payment from the sub. 

You may also be able to explore filing a UCC financing statement, to gain a voluntary interest in the material being delivered on credit. This can run into some potential difficulties in the construction context, but it is another potential security interest available. 

When lien rights don't exist, other means of protection can sometimes require getting creative, or the requirement to just rely on the credit-worthiness of your customer. 

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