THE MECHANIC’S LIEN LAW PART 2
Last time we were discussing the Mechanic’s Lien Law. This is the law that gives a tradesperson or material supplier the right to recover money for his/her labor or materials from the owner of an improved property by causing that property to be sold. As discussed, the supplier or subcontractor must notify the owner of record and lender of the property within 20 days of first providing value. A copy must also go to the General contractor. If the 20 day time period is missed all is not lost. You can file the notice late and you then have rights on anything done or supplied back 20 days from the date of filing, but not on anything older than 20 days.
THE LIEN
Once you have served the owner, lender and the General Contractor the 20 day notice (usually by certified mail) you have just started the process and the next steps must be done within certain time frames or your claim can become void. The next step if you haven’t been paid, is to file the actual lien on the property. This you do by filling out the correct, most up-to-date version of a Mechanics Lien form. These can be obtained at most stationary stores or any Builders Exchange, or online. Make sure you have the most recent version or it can be voided ( in fact there are changes taking effect on January 1st of 2011 that will require new forms and slightly new procedures, so bring yourself up to date). You fill in the information as asked and take the form to the County Recorders Office in the County where the property is located. You have the document recorded for a fee (usually $15-$20), and have a copy sent to the lender, owner and General Contractor. Beware that the recording must be done within certain time limits. If you are a General Contractor or a subcontractor, or supplier, it must be done within 90 days of when the project was finished, unless a “Notice of Completion” has been filed by the property owner. In that case the General has 60 days to file but the subs and suppliers have only 30 days from the date that notice was recorded. Subcontractors and suppliers must keep a close eye on what is being recorded pertaining to their project or that 30 day time limit can pass and your lien rights are lost. Another notice that has the same effect as the Notice of Completion is the “Notice of Cessation”. This is a notice by the owner that all work has stopped and recording it starts the clock running on the lien period.
TO PERFECT THE LIEN
The last step in the process is the actual “Complaint to Foreclose” or “Perfect” the lien. This lawsuit must be filed within 90 days (for everyone) from the date of the recording of the lien or the lien automatically expires. Even though it expires the lien still remains on the property and at some point in time you will be asked by the owner to remove that lien, and since you no longer have a valid claim on the property. If you refuse, the owner may have a right to take legal action against you. If, during the 90 day waiting period the owner makes arrangements to extend this period by mutual agreement that is allowed, but in no case can the process go on for longer than one year from completion.
Those are the basics of the Mechanics Lien law. Just be aware that the forms and guidelines change constantly and if you happen to use last years form, even if the difference has no effect on the situation, the lien can be voided. Many contractors and suppliers fill out these notices, file and record the required forms with the County on their own. As you can imagine a lumber yard may have hundreds of Preliminary Notices each year and they know all the filing times and forms by heart. But if you are new to the game or you have an exceptionally large sum of money at stake you may want to have an attorney handle this for you. I have heard of liens worth several hundred thousands of dollars voided because of a misspelling of a street name, or a notice that was one day late. This law is one of the absolute best protections a builder or supplier has but the rules must be followed to the letter or it’s useless.
Last time we were discussing the Mechanic’s Lien Law. This is the law that gives a tradesperson or material supplier the right to recover money for his/her labor or materials from the owner of an improved property by causing that property to be sold. As discussed, the supplier or subcontractor must notify the owner of record and lender of the property within 20 days of first providing value. A copy must also go to the General contractor. If the 20 day time period is missed all is not lost. You can file the notice late and you then have rights on anything done or supplied back 20 days from the date of filing, but not on anything older than 20 days.
THE LIEN
Once you have served the owner, lender and the General Contractor the 20 day notice (usually by certified mail) you have just started the process and the next steps must be done within certain time frames or your claim can become void. The next step if you haven’t been paid, is to file the actual lien on the property. This you do by filling out the correct, most up-to-date version of a Mechanics Lien form. These can be obtained at most stationary stores or any Builders Exchange, or online. Make sure you have the most recent version or it can be voided ( in fact there are changes taking effect on January 1st of 2011 that will require new forms and slightly new procedures, so bring yourself up to date). You fill in the information as asked and take the form to the County Recorders Office in the County where the property is located. You have the document recorded for a fee (usually $15-$20), and have a copy sent to the lender, owner and General Contractor. Beware that the recording must be done within certain time limits. If you are a General Contractor or a subcontractor, or supplier, it must be done within 90 days of when the project was finished, unless a “Notice of Completion” has been filed by the property owner. In that case the General has 60 days to file but the subs and suppliers have only 30 days from the date that notice was recorded. Subcontractors and suppliers must keep a close eye on what is being recorded pertaining to their project or that 30 day time limit can pass and your lien rights are lost. Another notice that has the same effect as the Notice of Completion is the “Notice of Cessation”. This is a notice by the owner that all work has stopped and recording it starts the clock running on the lien period.
TO PERFECT THE LIEN
The last step in the process is the actual “Complaint to Foreclose” or “Perfect” the lien. This lawsuit must be filed within 90 days (for everyone) from the date of the recording of the lien or the lien automatically expires. Even though it expires the lien still remains on the property and at some point in time you will be asked by the owner to remove that lien, and since you no longer have a valid claim on the property. If you refuse, the owner may have a right to take legal action against you. If, during the 90 day waiting period the owner makes arrangements to extend this period by mutual agreement that is allowed, but in no case can the process go on for longer than one year from completion.
Those are the basics of the Mechanics Lien law. Just be aware that the forms and guidelines change constantly and if you happen to use last years form, even if the difference has no effect on the situation, the lien can be voided. Many contractors and suppliers fill out these notices, file and record the required forms with the County on their own. As you can imagine a lumber yard may have hundreds of Preliminary Notices each year and they know all the filing times and forms by heart. But if you are new to the game or you have an exceptionally large sum of money at stake you may want to have an attorney handle this for you. I have heard of liens worth several hundred thousands of dollars voided because of a misspelling of a street name, or a notice that was one day late. This law is one of the absolute best protections a builder or supplier has but the rules must be followed to the letter or it’s useless.
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