What You Need to Know About Liens

On February 24, 2008  By Scott Wolfe Jr

Lien statutes are complex and technical in every state, but throughout the country common themes and policies emerge.

If you’re in the construction industry, it’s important to know these policies, and specifically it’s important to know how to use a lien and how liens can help your business.

Liening a project starts before work even begins

The urgent need to lien a project usually strikes a company after a job’s completion, but in many situations preserving lien rights requires serious consideration before work even begins and any dispute arises.

While pre-lien requirements are not applicable to every project and organization, one of the most common liening mistakes is for an organization to neglect pre-lien requirements and thereby abandon their lien rights.

The most common pre-lien requirement is the need to give the property owner notice of the lien laws.

Simply stated, the laws in most states require a contractor to notify the property owner that it may lien the project if it is not paid.

The notice must be delivered – in most cases – before services are rendered or materials are delivered.

An article on Louisiana notice requirements, plus some applicable forms, can be found here.

An article on Washington’s requirements, plus some applicable forms, can be found here.

One common misunderstanding about lien notices is that they are only required to be sent before liening a project.

Do not fall prey to this myth.

Lien notices, when required, most always require delivery before work begins, and not simply before the lien is filed. If you fail to preserve your lien rights with the proper notices, you’ll forever lose your right to lien that construction project.

Your lien rights won’t last forever, or for very long

If there is any delay in getting paid on a construction project consider filing a lien immediately. Many companies lose their right to lien a project because they wait too long to file.

The window of opportunity to file a lien is short, and once you’re time expires, you lose this powerful collection tool forever.

If payment isn’t on-time, protect your company’s interest in the property, and file your lien immediately.

A lien is the first step, not the last step

After filing a construction lien, you will certainly have more work ahead in attempting to collect.

In many cases, a construction lien by itself will result in prompt payment. In these cases you will likely be charged with the duty of canceling the lien.

This can be as simple as drafting a final letter and sending it to the property owner, or executing and notarizing a formal lien cancellation certificate (depending on state requirements).

If the lien does not produce payment, it will be necessary to take an additional collections step. Contrary to popular belief, construction liens are not permanent. In fact, they normally don’t last very long at all and they cannot be renewed.

After filing a lien, if not immediately paid you will need to bring an action in court to “foreclose” or “enforce” the lien in some way. This process essentially converts your construction lien into more formal and permanent “judgment.” The judgment can be executed by seizing property and through other techniques.