Confusing a Lien with a Prelim

So what’s the difference?

Here is a simple analogy:

Let assume that you want to see the latest summer blockbuster movie before it is out of the theater and only available on DVD or Streaming. You make plans to go to the theater on Saturday night. You arrive at the theater, parking is free and now you proceed to the box office. What happens next?

  1. You show them your prepaid ticket on your iPhone or
  2. You buy a ticket which is your admission into the theater to view the movie.

Here’s the analogy: The ticket (which you paid for) is your “Prelim” while the “Movie Viewing Experience” is your Lien.

So you need a ticket to see the movie the same way you need a prelim to have the right to file a lien.

Therefore, a prelim, or pre-lien is NOT the same as a lien.

Once you have clarity on the purpose and scope of these two very different documents, your ability to protect your job related accounts receivables will become a whole lot easier.

Another way to remember is:

  1. A prelim SECURES my RIGHT to file a lien
  2. A lien SECURES my job related unpaid accounts receivables.

Now the kicker: You must take one of the following three actions before either of these documents will result in collecting your job related accounts receivables:

  1. Sign a release of your lien in exchange for payment in full from the entity named in your lien.
  2. Negotiate payment terms and refile an extended lien.
  3. Have your attorney use the lien as a basis upon which to file a foreclosure lawsuit against the property named in your lien and collect the amount claimed in your lien from the proceeds of the sale of the property.

This is a very simple yet accurate summation of the prelim/lien process. However, there are variables that can affect any of these conditions:

  1. Timing (time to serve your prelim, time to record and serve your lien, and time to commence a foreclosure lawsuit).
  2. Not all states require a prelim (check the CRM 50 state guide)
  3. You must be legally eligible to claim a lien (A contractor with an expired license, may not be able to claim a lien)
  4. Not every state offers the option to extend a lien.

Need more information on these and other options for methods to secure your job related accounts receivables?

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