A few months ago we posted about a mega-project in Las Vegas facing financing troubles and leading to over $500,000,000 in mechanic liens. The point? Even on the biggest of projects, mechanic liens transform your payment problem with the hiring party, into a problem that affects the entire project.
Well, Atlanta-based roofing company American Shingle just filed for bankruptcy (bankruptcy filing legal docs here), and they are illustrating this same point on a tiny scale. Instead of a billion dollar mega-project, mechanic liens are affecting residential properties across Georgia and elsewhere.
Folks frequently ask me: what’s the benefit of filing a mechanic lien?
An article I wrote in February 2008 answers this question in detail, but for the purposes of this discussion about American Shingle, here’s an excerpt:
If you’re unable to get paid on a construction project, you have a legal remedy under contract law only against the person who hired you. A mechanic lien, however, completely changes this paradigm. With a lien, you can sue the person who hired you, along with the property owner – regardless of how far you are down the contracting chain [depends on state laws].
What this means for the American Shingle situation is highlighted by a news story from the Atlanta NBC Affiliate 11 Alive: American Shingle Customers Could Pay Twice.
Unlike the 11 Alive story, the Construction Lien Blog focuses on creditor’s rights (versus consumer rights). If you’re a consumer, you can check out the “Consumer Ed” resource published by the GA Department of Consumer Affairs, which has information on liens.
For creditors, however, the American Shingle situation is a good lesson. Protect your lien rights by sending required notices and filing your liens within the legal time frames. You never know when companies may run into financial difficulty and file bankruptcy (American Shingle was a pretty big company). When something like this happens, your lien rights will be invaluable.
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Earlier this year, we wrote about pending legislation in Michigan aiming to abolish the Michigan Lien Recovery Fund (read the posts here and here). While perhaps a really good idea…the idea was bankrupt.
