Mechanic Lien Process

      Do-it-yourself, or hire an attorney? April 2, 2004

Question
Mechanic lien process… I visited Superior court, and they were helpful but told me to visit District court. They were not helpful and said I needed a lawyer.

I am about 120 days out on 20k. I have spoken to two lawyers who said the dough is too small to sue for. So, I have a call in to a local attorney who helped me buy a house to help me do the lein in district court, if it makes financial sense to hire him.

Can I do this myself? I will search the Knowledge Base here, but what have you done?

Forum Responses
(Business Forum)
From contributor A:
What state do you live in? Here in Minnesota it would only cost a couple hundred to file a lien through an attorney and it seems to me that paying just 1 or 2% of the outstanding balance to file a claim is well worth it.

To sue somebody is different than filing a lien and the attorney may have thought that he wouldn't get a big enough fee to cover his time to sue somebody. May require a lot of his time, where a lien only requires a few hours of an attorney's time.

Contact an attorney that specializes in real estate or financial matters for advice.



From contributor G:
Your lien rights may have expired. Let us know what you find out.


From contributor T:
Most states require a notice of 30 days to the owner of your intent to file a lien. I have had good success with just a letter to the owner of my "intent to file a lien." Of course, sent with return receipt. Good luck!

P.S. You might want to check with your state for the limits of a "small claims" that you can do yourself. Considering all the attorney fees involved. Nothing is as small as nothing at all.



From contributor S:
When a lien position expires, what happens after that date? Out of luck completely, or more difficult to collect?

It seems to me the lien process is simple and other than material suppliers, only a few subcontractors follow the process (i.e. post-preliminary lien, etc.).

What is the best standard process for a cabinet shop working for a general contractor building custom homes? I think it goes something like this and admit I don't do the preliminary lien notice although imagine a good idea.

1) Have a solid contract with clear scope of work.
2) File a preliminary lien with contractor. Believe it isn't required if you're the prime contractor with the homeowner directly.
3) Have authorized change orders and attempt to collect in writing.
4) If the client doesn't pay, file a lien with the county recorder and start the legal process.
5) Hope the client pays and if not, hope you have the money in the bank to wait out the claim.

I heard of one client that was selling/installing cabinets for Emporium stores. Emporium project managers kept giving them work and weren't aware the company was going bankrupt. The cabinet shop was into this corporation $400k and luckily was paid down the road. Lots to consider.



From contributor V:
A couple of things… in North Carolina you have 120 days to file a lien and 180 days to enforce the lien. If you miss the dates you are not out of luck completely - you can't file a lien but you can still sue for breach of contract. Even if you have lien rights most of the time, you do not want to enforce them (force sale), because most of the time you would be behind a large mortgage that would have to be paid off first, then you... So in order to get your 20k worth of cabinets, you most likely would have to buy the house for the 1st mortgage and then sell it to recoup your amount. This is a very simplistic scenario. The key is that liens do help but they are not perfect. Most times you still have to sue to get a judgment in place. Judgments stay on the books longer and follow the individual or company instead of just that home the cabinets were put into.

A few things that I do to help protect me... If it is a custom home, I have the homeowners and the contractors sign the contracts - this gives me double the amount of people to collect from and prevents me from becoming a 2nd tier subcontractor if liens are filed. If it is a builder doing a spec, I will try very hard to get him to sign individually and as the company. Again, this gives me some additional recourse if the company goes under. It is a little harder on this, but I just put the name of the builder and the company name on the contract and more often than not they sign it without question.

All said and done, if they don't want to pay, it is going to be hard no matter what you do. Know your customers and protect yourself as well as you can. I would also say that it would be worth it to get a lawyer involved for the 20k, even if it is just getting a judgment.



From contributor L:
Some things to add to the above notes:

Liens can be bonded around so that title can transfer and you not be paid.

If the owner paid the GC, they can sue you for slander of title (in CA). They do this as a counter-suit to get you to release the lien and force you to perfect it (foreclose on the property) or remove it.

In California you are required to send a preliminary notice that tells the lender, GC and owner that you will be working on their property and have lien rights. If you don't send this notice your lien rights are only valid for work performed from when you do so. We file this when we start shop drawings or are awarded the contract.

If the fixtures aren't attached to the real estate, you may not have lien rights against the property.

Generally an attorney that specializes in construction law would be a better choice.

You should be able to file a lien yourself for less than $50.



From contributor V:
I know this doesn't help you out of your situation, but this thread highlights the fact that all of us need to pay for an hour of time with a real estate attorney in each of our states, and find out all there is to know about liens and such. I am fortunate to have a good friend that is an attorney and he has given me great advice on how to handle things if they go bad, so I don't have to worry so much when they do. There are too many differences from everyone's state to have a real good advice thread here.


From contributor L:
We use PreLien2Lien™ software. It keeps it all in a database and knows the laws for all 50 states.


From the original questioner:
So, the local attorney will look at the regs and see if he can do it. I feel marginally better going with him, since we see each other around and he helped me sell a house last year, vs. cold calling the deadbeat specialists in my area who I do not know.

I told him I don't want to ramp up the costs, but would pay a couple hundred bucks to a lawyer to get the lien filed correctly. I will comb the regs on-line myself over the next few evenings to see if I can make sense of it.

Apparently, I have a choice of superior or district court. District won't do over 20K. I do not know pros and cons.

I was requested to and performed some minor follow-up work two months ago, so I am assuming for now that I am within the time limits.

MA used to require the lien right filing beforehand, but the ML rules were changed significantly in MA a couple of years ago, and this is one of the changes.



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