What Costs Can I Include in a Mechanics Lien?

I practice law, and focus on construction law, in the states of Washington, Oregon and Louisiana.    Whenever folks are looking to put together a mechanics lien, this is a question that is very frequently asked.  (Previously wrote about it here).

While the question seems quite simple, it’s actually a bit complicated.   And it’s a very sensitive question to boot.   The answer differs depending on which state’s law applies, and some states are more sensitive to the topic than others.   In some states, if the lien amount is listed incorrectly, or includes costs not allowed under law, it could invalidate the entire lien.

In other words, tread very carefully.

So, what is this question asking anyway?   Well, folks are typically looking to include two different costs into the amount of its lien.   First, the cost of filing the lien itself.    This may be the cost of an attorney, the filing fees with the county, or the cost of our service ($295).   Second is charged interest on the unpaid account.   Sometimes this is the state’s judicial interest, or interest allowed by contract.

Let me make something very clear:   This is an extraordinarily complicated question to answer on a general basis.   You should consult with an attorney to figure out exactly what costs you can and should and may include in your lien.

However, let me take a crack at trying to answer this question generally.

In Louisiana, Washington and Oregon, if someone wants a general rule, I always advise my clients to simply file the lien for the amount that is due under the contract, without any of the extras.  I advise this unless there is specific circumstances and law that allow them to do the contrary, and they know the law.   I advise this simply in an abundance of caution for these two reasons:

1) If you include it (the extra costs), and you cannot include it, it could invalidate the lien; and

2) if you do not include, it doesn’t mean you can’t collect it. It just means its not part of your lien, and you don’t have the lien against those particular funds (you still have any legal or contractual right to it).

Washington Law Protects Contractors from Dangers of Frivolous Lien Statute

A quick word from the construction law case files:

The Court of Appeals, Division 1, out in Washington state, has refused to deem a construction lien as frivolous based upon the complexity of the construction contract at dispute. The court in SD Deacon Corp. of Washington v. Gaston Bros. Excavating, Inc., decided back in May of this year, that the state’s “frivilous lien” statute, coded under RCW 60.04.081, requires a more in-depth analysis of factual circumstances surrounding the substance of the contract and the lien.

The court in SD Deacon further reasoned that a court can only evaluate in a frivolous lien proceeding are, by way of example, whether the lien was properly filed, signed by the proper party, properly served, and meets the statutory form requirements. Issues of substance of the lien (i.e. the contract amount, amount due or change orders) are issues which require more substantive proceedings to analyze factual circumstances.

Because the frivolous lien procedure codified in RCW 60.04.081 does not provide for such proceedings, a party seeking to extinguish a lien filing will be unsuccessful in attempting to show to the court that the lien was frivolous.

Essentially, the court’s new rule is that the “lien must be so devoid of merit that the claim has no possibility of succeeding” and that “there must be findings supporting the conclusion that the lien is invalid beyond legitimate dispute.”

The Court’s ruling provides some hope for “fringe” contractors who’s claims hold some element of uncertainty, but who desperately need the security provided by a lien in order to collect payment from an uphill contractor or owner.

The frivolous lien statute was enacted to prevent fraudulent claims against contractors, by awarding successful parties attorneys fees. The ruling in the case shows that the award of fees will not be granted unless your lien fails to meet statutory form requirements.

Express Lien, Inc. has the knowledge and experience to meet these stringent requirements. Let us help you ensure your lien’s success!

What Are the Chances of Getting Paid After Filing A Lien?

In today’s economic climate, payment problems are plaguing construction projects.

Just recently, a prospective customer called us and asked:  what are the chances of getting paid after filing a lien?

Unfortunately, it’s impossible to provide a success percentage because each situation is different.

However, mechanics liens are far and away one of the most effective ways to secure payment for your company.

To put it simply then, we can only point out the obvious in response to this question.   The obvious answer is that filing a mechanics lien is a first, and oftentimes necessary, step to get paid on a problem project.

Without a recorded lien, your company is simply a bystander to the project’s payment obligations, and is pinning its company’s rights to payment on good fortune.

Filing a construction lien isn’t extraordinarily expensive, and it’s a step in the right direction for your organization.  Get to know the lien deadlines and laws for the state where you performed work, and then make a move to protect your company by securing your lien.

File a lien today and get payment to come your way!  Lien SMARTER…..to get paid.

What Costs / Labor To Include In Your Lien?

It’s been an interesting week on the web as it relates to mechanic’s liens, as I’ve run across a number of web posts about the types of services that can be included in a lien.

Let’s look at the matter theoretically.   Construction lien laws are normally drafted to protect contractors, who invest labor and expense into the improvement of a property.  However, since the laws also balance the property rights of persons or organizations, each state certainly does something to qualify what types of labor and expense can be represented in a lien, and which cannot.

The question here, therefore, is quite simple:   have you performed work or provided materials that can be the subject of a lien?

It’s one of the most important questions a contractor or supplier can ask when determining how to best collect on a non-paying account or project.   If you work does not qualify for a lien, for example, there is no need to even consider if notice is required and other lien filing requirements.

It’s important to consult the laws or your particular state to determine what type of materials and labor can be the subject of a lien, and which cannot.  However, two recently decided cases in Virginia and Kentucky are revealing of some general principals that are followed by most states.  The principal is essentially this:  you can only lien for labor and materials that actually go into improving the property.

What does this exclude?

In Virginia, Virginia Lawyers Weekly reports that a Hanover County Circuit Court invalidated a mechanic’s lien filed by a contractor that incurred costs in anticipation of construction of a steel building, but did not provide labor or materials actually employed in construction of the building.

The case is captioned Dallan Construction Co. v. Super Structures General Contractors, Inc, and can be downloaded here.

Similarly, in Kentucky, the Kentucky Court of Appeals held that “mowing, trimming, edging and street cleaning” did not “permanently improve the property,” and therefore, a mechanics lien was not allowed to be filed for the services provided.  That case is discussed at the South Carolina Community Association Law Blog, and is captioned Steeplechase Subdivision Homeowners Association, Inc. v. Thomas, Ky. Ct. App. 2008.

Virginia’s Interesting 150 Day Rule

In most states, a contractor only has 1 lien deadline of concern:  when the lien must be filed.  In Virginia, however, contractors must juggle two lien deadlines.

First, like other states, Virginia has a regular lien filing time requirement.  All liens must be filed within 90 days from when labor and services were last performed by the contractor.

Unlike other states, however, Virginia has an interesting second deadline, referred to in the state as the “150 day rule.”

From the last day of work, the claimant must count backwards 150 days.   Generally speaking, a contractor is not allowed to include any labor or materials supplied outside this window in its mechanics lien.

While the 150-day rule does not apply to retainage funds or sums not yet due because of a “pay when paid” clause, it usually applies otherwise, and will invalidate a lien if it includes sums due not within this 150-day window.

As mentioned in a previous post about the “payment chain” in Virginia,  an arguable third deadline of concern in that state, subcontractors and suppliers in Virginia have extra motivation for filing liens immediately upon non-payment.   The 150-day rule in Virginia is even further cause.

Virginia – Strongest Liens of them All?

In the past, we’ve posted about the strength and effectiveness of construction liens.    Across the nation, construction or mechanics liens can be used as a powerful collections tool by contractors, suppliers and others working on construction projects.

The state of Virginia, however, has perhaps the most powerful mechanics liens in the nation.

In most circumstances, a mechanics lien will get resolved without the property being foreclosed or the property owner filing bankruptcy.   However, there are occasions (and in this economy, increasingly so) when a project falls apart, and those working on the jobsite find themselves waiting for proceeds to trickle down from foreclosure or bankruptcy proceedings.

In most states, a filed mechanics lien takes priority below the construction loan bank’s mortgage.   Further, the filing of bankruptcy usually defeats any lien rights.

In Virginia, however, the opposite is true.  A properly filed mechanics lien in Virginia will not get defeated in bankruptcy, and it will have priority over the construction loan bank.   Earlier filed mechanics liens have priority over later filed instruments.

We’ve posted in the past on why its important for contractors to lien unpaid construction projects.   This review of the powerful lien laws in Virginia stands as a reminder of how effective a mechanics lien can be, and why its important to make your claim timely & properly.

Caution: Lien Laws in are Hyper-Technical

In most states, the liens laws are hyper-technical.   This means that the laws have many requirements, and that courts strictly construe the rules against the party filing construction liens.

This is true for nearly every state.

While laws across the nation provide lien rights to those in the construction industry, because of the power of these instruments most states require that the liens be filed in exact accordance with the law to be valid.

This is especially the case with regard to the required contents of a lien.

Each state has different requirements for what must be stated within a mechanic’s lien, and how that information must be stated.

Every state, for example, will require the claimant to identify the property being liened.  In Louisiana, Washington and Virginia, however, the law requires that the lien use the legal property description and not simply a municipal address.   The proper identification of property can be so important we’ve written an entire blog post about it here.

In Virginia, the laws are even stricter.   Because the Virginia lien law is land record based, the claimant is expected to perform a complete title search to acquire the exact legal owner and legal property description.   A lien that does not lien the exact owner, at the exact property for the exact amount due, can be deemed invalid by courts.

Express Lien does this leg work for your company, helping your company properly prepare these important legal forms.   Our professional legal document preparers are familiar with the lien and notice forms in your state, and can help your company Lien Smarter.

Will the 2009 Economy Create More Mechanic Lien Filings?

At the Construction Lien Blog, we’ve written about the current state of the economy in America, and how this has affected the construction industry from coast-to-coast.

However, there is recent conversation in the media and out in the blog-o-sphere that the economy’s impact on construction has increased the amount of mechanic’s liens filed by contractors.

The Pacific Business News source in St. Louis, for example, has a story on a construction attorney in Missouri who says that he filed twice as many liens in 2008 as he did in 2007.

A similar article appears in the Virginia Lawyers Weekly, which reports that construction litigation in general is increasing in the current economy, with increased claims for construction delays, defects and problems with collections.

It seems that the business journals are full of stories about construction projects being slammed with liens, like the story here and here.

As the new year approaches, what will we see in the construction industry that is predicted to remain pretty stagnet?

One thing is for sure, regardless of whether lien filings increase, decrease or stay the same, with the current credit crunch and economic woes, it’s more important than ever to file liens on claims you do have, and to do it timely and properly.

Be Careful When Using Free Legal Forms

Gerard Simington with “FindAnAttorneyForMe.com” published an informative article that warns businesses about using free legal forms found on the internet.

The Internet has placed legal information and legal forms at our fingertips – and its easy to forget sometimes that the law is a very complicated subject, and legal forms are no exception.  While a legal form may seem simple on its face, the blanks can carry significant legal consequences.

It’s always great to hire an attorney to draft legal documents from scratch, or to “tweak” legal forms to fit your particular need.   The costs associated with legal counsel, however, are simply sometimes out of your business’ reach.

Legal Document preparation services like Express Lien are perfect for these situations.  Our staffs of professionals are familiar with the forms that relate to your construction project, and we can help you draft & file your forms properly and avoid costly mistakes.

7 Habits of Contractors Who Lose Money…and How to Break Them

The Construction Commando’s “Contractor’s Secret Weapon” published an article with this title that described seven instances when contractors lose money on a project.  While the article was drafted to an audience of California contractors, the habits apply nationwide.

It will be to any contractors’ benefit to review this article online, access which habits apply to you, and make an effort to avoid the costly mistakes.  Any progress will help increase your bottom line.

The seven habits highlighted are:

1)    The “Gentlemen’s Agreement” – A Handshake and Your Word.   Bottom line:  Get it in writing.
2)    Using Contracts that Fall Short of the Legal Requirements.
3)    Not Getting Every Change Order in Writing.
4)    Failing to invoice immediately.
5)    Failing to serve a preliminary 20-day notice (pre-lien construction notices)
6)    Don’t Worry – They Will “Take Care of You” on the Next Job
7)    It isn’t good “customer service” to record a Mechanic’s Lien