FAQ: Can I Lien a State Or Federal Project?
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Short Answer: Yes. Although frequently called a “lien,” it is more accurately referred to as the filing of a claim.
Long Answer: I’ve had a number of folks contact me in the past week or so inquiring as to whether they could file a lien against a federal or state project. While some companies have been doing state and federal works for years and know the claim procedures inside and out, the state of our economy has forced some outfits to experiment with federal and state projects for the first time. I find that these companies know a good deal about mechanic lien laws as they relate to private projects, but are just uncertain how to file a similar claim on a public work.
By the way, if you’re not sure about whether a project is a state, federal or private project, check out this post: The Difference Between Public and Private Projects. The Reader’s Digest version of this post however is this: look to who owns the property. If the property is owned by the state, it’s a state project. If it’s owned by a private company or person (including non-profits, churches and private schools), then it’s a private project.
If you’re unpaid for labor or materials furnished to a private project, your remedy is to file a mechanics lien against that project. As I posted about in a previous FAQ article, a mechanic lien is filed against the actual property where work or materials were furnished. It creates a security interest of sorts – similar to a mortgage – in the property itself, and if you remain unpaid, and you file a lawsuit to enforce the lien, the courts may actually order the property sold to pay your debt.
Obviously, if on a state or federal project working on state or federal land, the State or US Government is not going to allow contractors or suppliers to obtain an interest in their land. Therefore, while there are remedies available to you on these projects, the remedy is not exactly like the private mechanics lien. You’ll never get a piece of the property as compensation for your work.
To accommodate this protection of state and federal land, there are laws that require most state and federal projects to have a payment bond issued. A payment bond is issued by a surety company and guarantees payment of all subcontractors, suppliers and professionals. A surety company is like an insurance company, and the bond itself acts like an insurance policy for payment of the laborers and materialmen.
So, if you’re unpaid on the project, rather than file a lien against the property itself, on state and federal projects you would file a lien against the payment bond.
While this sounds less secure, it is actually more secure. A physical property can be over mortgaged, and there are all types of lien priority issues to determine whose claim ranks above the others. Payment bonds have no such problems. If you timely make your claim, you’ll get paid, and surety bond companies are very,very rarely over leveraged.
These claims against the bond are called “bond claims,” “miller act claims,” and “little miller act claims.” They are just as frequently referred to as simply state liens or federal liens.
Just like mechanic lien claims, filing a state or federal lien or bond claim is hyper-technical. You must follow strict deadlines to file the claim, and in many instances, you’re required to deliver a preliminary notice at the start of your job. The claim itself must contain certain data about your work and the project, and it must be delivered to certain parties in a certain way (i.e. certified mail, registered mail, restricted mail delivery, etc.). Some states require state liens to be filed with the recorder, while other states don’t require an actual filing with the recorder, and only require filing with the agency commissioning work.
Zlien files state and federal bond and lien claims all across the country, and our LienPilot also manages the lien and notice deadlines and requirements for state and federal projects. Want to learn more? Comment below and I’ll be glad to answer any questions.
