WHAT YOU SHOULD KNOW
Pre-construction knowledge of mechanics lien laws is essential. If you don't take steps very early in the project to preserve your lien rights, they could be lost forever. For example:
- In Missouri, a prime contractor will forever lose its mechanics lien rights if it does not provide a special statutory notice to the owner prior to the receipt of any payment in connection with the project.
- In Florida, subcontractors, sub-subcontractors, and materialmen must serve the owner with a "Notice to Owner" within 45 days of first furnishing labor or material at the site.
- In Oregon, a supplier or contractor without a direct contract with the owner is required to send a "Notice of Right of Lien" within eight days after the first delivery of labor or materials.
Mechanics lien laws differ tremendously from state to state. From Preliminary Notice in California, to Release of Lien in Texas, there is no uniform lien statute. For Example
- In North Carolina, contractors performing warranty or punchlist work are unlikely to qualify for extending the time for filing a lien claim…but in South Carolina such work would qualify.
- In Indiana and Maryland "no lien" contracts are valid…but are outlawed in Michigan and Massachusetts.
Pre-lien notice requirements vary greatly, from multiple notice obligations for lower-tier contractors and suppliers in Texas, to no mandatory notice requirements in Nebraska and other jurisdictions. For example:
- In Idaho, notice of the lien filing must be given to the owner within 24 hours; in Arizona, it must be served on the owner within a "reasonable time."
- Texas requires it be sent to the owner with a filed lien affidavit within 5 days, while California it's within 10 days of the recordation.
Mechanics lien filing deadlines vary greatly from state to state. Most states have strict deadlines for filing claims and notices; miss the deadline, and you lose your chance to file.
- In Texas, the deadline is the 15th day of the fourth month after the date work is completed.
- In Oregon, it's 75 days after the last labor or material is furnished or the project is completed, whichever is earlier.
- In Georgia, the deadline is three months (not 90 days); in Idaho, it's 90 days (not three months).
- In New York, the deadline on most private projects is eight months—but not for single family dwellings!
When working in multiple states, beware! Do not assume that familiarity with one state's lien laws will equip your company to protect its rights under the lien laws of another jurisdiction. For example
- In Pennsylvania, only contractors who have a direct contract with the owner–and subcontractors who have a direct contract with the prime contractor–have mechanics lien rights (among the project participants supplying labor or material).
- And subcontractors to subcontractors frequently enjoy lien law privileges, but not in Kansas.
- In certain states, lien waivers are valid only if they substantially track statutorily prescribed lien waiver forms.
In dealing with mechanics lien laws, being close just isn't good enough. The failure to exactly satisfy lien law requirements is often fatal to your claim. For example:
- In New York, if a lien claimant files lien claims just one day past the 30-day filing deadline (for public projects), they lose all lien rights.
- In Maryland, a "Notice of Intent to Claim a Lien" must be served within 120 days of the claimant's last work-not four months after the last work-exactly 120 days after. Not understanding such differences can be fatal to your company's lien rights.
- A valid claim of lien does not guarantee payment. Your lien rights could fall short of the payment guarantee you need..
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