From Part 1 of this series we learned that you must wrap your head around two basic concepts:
Real Property and Work of Improvement.
If you may still be unsure of these, please read part one of this series before going any further.
Once you have Real Property and Work of Improvement under your belt. The next item to consider is: Eligibility
Just wanting to file a mechanics lien because you are convinced that you performed a work of improvement to Real Property isn’t quite enough to proceed. Don’t misunderstand, almost anyone who wants to file a mechanics lien can by all means do so. However, if you file a mechanics lien and did not legally have a right to claim a mechanics lien, you could be opening Pandora’s Box.
Claiming a mechanics lien without first securing a lien right is illegal and could make you liable for any damages your invalid lien may cause the owner of the property. The mechanics lien is a great tool used to secure your money, and a solid vehicle for collecting it. But the mechanics lien is only available to those who have earned a “Right to Lien”
The Right to Lien may be secured by a variety of processes. These differ from state to state. So don’t assume that because you claimed a valid mechanics lien in New York, that you can proceed the same way in Florida. The State Lien Laws are completely different in these states as they are in other states.
So how can you be safe to proceed with claiming a mechanics lien?
One basic principle exists in almost every state. That is that the lien laws are designed to protect those who are in compliance with the laws in general. Example: If you are a Contractor and the state in which you conduct business requires you to hold a specific “Contractor’s License”. Then you must not only have that license, but it also must be valid. You may not expect the state to grant you a mechanics lien right if you have allowed your contractors license to expire or you are attempting to work under a suspended license. Same holds true for any requirements demanded by the Secretary of State for legally conducting business in their state. If you don’t respect the state laws, then don’t expect protection under their laws.
As a side note to the above, do not enter into a business transaction which may result in the claiming of a mechanics lien under a name that differs from your license. If you were granted a license as: “Jack Ready Framing Services” then don’t issue an invoice to your client as “Jack’s Framing”. This is all about keeping it legal, not convenient, legal.
Another caution about having a “right to lien” is the serving of a proper and timely “Preliminary Notice”. Over half the states in our country require those in construction, or suppling materials to a construction project, to serve a preliminary notice which “grants them the right to claim a lien”
IE: No Prelim = No Lien
Now this does not hold true for everyone and surely not for every state. However, when the state requires you to serve a preliminary notice; within 8, or 20, or 45 days from the day you being to work of the job, then you best do so if you want to protect 100% of your anticipated revenue from the project. Sure there are some loopholes which may grant you partial protection by serving a late notice, but the smart players will opt to embrace a policy which allows them to be protected on every job.
I would like to now say: “That’s it”. however, there is still more to consider about protecting your right to lien. So keep a eye out for our next blog:
Are you protected by the Lien Laws? – part three: “a day late and you will be more than a dollar short”.