Category Archives: Claim of Lien on Real Property

Why can’t I lien my customer?

Seems like a logical assumption. You provided materials or services to your client and they have the ultimate responsibility to pay you. So why can’t you put a lien on them?

The answer is a little complex but I will do my best to clarify. The primary concept you will need to wrap your mind around is:

Mechanics Liens may only be placed on REAL PROPERTY

 

Now chances are that your agreement with your customer is that they pay you by cash, check, or some sort of transfer of money into your account. You cannot put a lien on money* so there is no mechanism for you to put a lien on your customer.

However, your customer does have an obligation to pay you. So when your customer decides not to pay you, the best option is to consider filing a “Breach of Contract” Lawsuit. or if the amount owed is within the limits allowed by the local “Small Claims” Courts, then consider filing a “Small Claims” action. This is surely a method available to you to secure your unpaid balance. However, these options may cost much more than the cost to place a mechanics lien on the REAL PROPERTY you helped to improve.

So, while a mechanics lien may not be used against your client. It can, and should be used, to secure the amount due to you from your client because the “FINAL BENEFICIARY” of the materials or services you provided is the Owner of the Real Property.

So the next most asked question is: Can I do both?

Can I lien the job and file a Breach of Contract Suit against my customer? Yes you can. BUT!

There is always a “but”. You may only collect once for the amount due to you. You cannot collect twice for the same balance due.

So we get down to asking: What is the wisest business decision?

My thinking is to file the mechanics lien. Why? because chances are that your customer is not paying you because they have not been paid for the work they performed on the same project in which they hired you. So if they were paid, the breach of contract suit becomes more strategic. But if they are still waiting to be paid, then the mechanics lien may be your most efficient method.

This subject can get a lot deeper depending on many different conditions which may exist. But to answer the question: Why can’t I lien my customer? this should provide you with a good understanding.

One last point. The mechanics lien can be a little tricky. It must be done properly to have any real impact. Make a small mistake and the time and money you invested in your mechanics lien may be easily squandered. Unless you are experienced in the preparation of mechanics liens, we recommend you consider using CRM Lien Services as your professional resource for this process.

(* you cannot lien the money your customer owes you. However, in some cases it is possible to put a lien on the money which is being used to fund the project – see Stop Notice or Lien on Funds)

I filed my lien . . . now what?

This is a very common question once a mechanics lien has been filed and served. The most important thing to consider is that your recorded mechanics lien: “Is not an end in itself”.

Most states offer two distinct options for a recorded mechanics lien. Some offer a third option which will be covered later. The first thing to be aware of is the “Life Cycle” for your mechanics lien. In many states the mechanics lien will become invalid 90 days after it has been recorded. Meaning that all of the time and expense you incurred to protect your lien rights and file your lien, will go down the drain on the 91st day. Why?  . . . because you must take action to advance your mechanics lien.

The most common action is to release your mechanics lien. This is the least expensive and is required if within the 90 day life cycle of your mechanics lien, the property owner has paid you for the full amount, or an amount which you have agreed to settle your claim of mechanics lien. Of course this action, releasing the lien, is only a viable action if you are paid. Should you not be paid, you must present your mechanics lien to a licensed attorney and have them begin a “Foreclosure Lawsuit” before your mechanics lien expires. This can be expensive. However, you may be able to capture your expenses should you win your case in court and request the judge allow recovery of your expenses in addition to the amount claimed in the mechanics lien.

Remember Option #1 Release of Lien (inexpensive), Option #2 Foreclosure Lawsuit (expensive)

Now there are some states, California for example, which offer a third option.

Option #3 Extend your mechanics lien.

This option buys you time (as much as 270 additional days) before you must start foreclosure. But the Lien Extension will cost you the price of a new mechanics lien. While the lien extension is designed to lengthen the time allowed to settle the claim, it must be agreed to and signed by both the claimant and the owner. Set terms for payment of the claim must be declared in the lien extension. And the claimant may advance the mechanics lien to foreclosure anytime during the extension if the terms of repayment are breached.

Not all states have this option but for those that do, it presents a very affordable and secured method to collect on your mechanics lien claim while holding the property in a collateral position.

Now with all of that said, be aware of the 91st day! Your mechanics lien, if left without action for 90 days, will become invalid and a cloud against the title of the property will be created. Your mechanics lien must be removed, with prejudice, when requested by the owner. It makes no difference if you have been paid or not. You are only allowed a limited period to take action with your mechanics lien. Should you let this time slip by. You will be literally up the creek without a paddle.

Have questions? Call us. We can help.

eSystems “Online Notice Management”

We have made some major improvements to our eSystems online document management program for 2016. Most significant is our online compatibility with the new Windows IE 11 Browser. All Waivers and Releases are now available to be prepare without reformatting, print direct from IE11, and save as a .pdf file for attachment to your email or text message.

In addition, the login screens have been upgraded to allow personal modification and updates to Account Passwords, and our new “User Password” security. Allowing CRM eSystems clients the ability to assign an “eSystems” Administrator to edit and create all User level password protection.

If you are using CRM to have your preliminary notices prepared and served, then you won’t find a more efficient and effective program to manage your served notices and prepare current versions of Releases and Waivers of your lien Rights, then eSystems.

Best of all, eSystems is available to all CRM Open Account Clients for a small annual subscription fee of only $69.00

To learn more about using eSystems, or to have eSystems added to your account today.

Contact CRM at ContactUS

Four Pitfalls to Avoid When Filing Your Ohio Affidavit of Mechanics Lien

Today’s business owners know and understand the struggle of getting paid for work done or services provided all too well. As economic uncertainty mounts, the importance of protecting your ability to secure payment through a Mechanics Lien is more important than ever. To help you secure your Lien Rights in the state of Ohio, please examine this short list of the top four mistakes claimants make when attempting to secure a valid mechanics lien. Avoiding these pitfalls is a great start to collecting your job related accounts receivable:

  1. Failure to understand and preserve your Lien Rights.
    In order to secure your accounts receivable, you need to have a clear understanding of your Lien Rights under Ohio’s Lien Law and the steps you need to take to preserve those rights. In the state of Ohio, a construction project “starts” when the Property Owner Files and Records a Notice of Commencement. To be valid, an Ohio Notice of Commencement must include all of the necessary information, including a legal description of the Property, a brief description of the improvement, the name and address of the contractor and Property Owner, the date of the first contract, and the name and address of the lending institution(s).The Notice of Commencement must be Recorded in the county where the construction project takes place, posted in a visible location at the project site, and Served upon the original Contractor. The Owner has 10 days to provide the Notice of Commencement. Should the Property Owner supply incorrect information or fail to follow the process as outlined, he or she is liable for expenses related to obtaining the correct information, as well as for any loss of Mechanics Lien rights as a result of the incorrect information.Once the Notice of Commencement has been filed, the subcontractor or materialman should File and Serve a Notice of Furnishing within 21 days of the first furnishing of labor and/or materials to the project. While filing a Notice of Furnishing is not required in the state of Ohio (especially if a Notice of Commencement has not been filed), subcontractors and materialmen are always best served to make it a habit of promptly filing a Notice of Furnishing to ensure their full Lien Rights.
  2. Failure to meet the deadline for Filing, Serving and Recording an Affidavit of Mechanics Lien.
    It’s important to be aware of the deadlines involved in filing an Affidavit of Mechanics Lien and follow them accordingly. On all commercial projects, a claimant has 75 days from the last day of furnishing labor and/or materials to file an Affidavit of Mechanics Lien. For residential projects, a claimant has only 60 days from the last day of furnishing labor and/or materials to file the Affidavit of Mechanics Lien.
  3. Leaving out important information in the Affidavit of Mechanics Lien.
    Unknowingly leaving out information or providing misinformation in an Affidavit of Mechanics Lien will invalidate your claim and cause you to lose your Lien Rights. To be valid, an Affidavit of Mechanics Lien must include:

    • The amount owed to the claimant
    • A description of the property
    • The name and address of the Property Owner
    • The name and address of the person for whom the work or materials were provided
    • The name and address of the Lien claimant
    • The first and last dates that work was performed or materials were supplied to the project
  4. Allowing the Mechanics Lien to expire.
    In the state of Ohio, an Affidavit of Mechanics Lien may be valid for up to 6 years, unless a Notice of Commence Suit is served upon the Lien claimant. If a Notice of Commence Suit is served upon the claimant, Lien Rights will expire 60 days after service if a lawsuit has not been filed.

­­­­­­These provisions are not an exhaustive list of every detail included in Ohio’s Lien Law and should not be taken as such. To avoid the unforeseen complications in this process you may be best to use an experienced Preliminary Notice and Mechanics Lien Service to prepare and serve your Affidavit of Mechanics Lien, Notice of Furnishing, Notice of Commencement and other notices. Using an accomplished service will ensure that the proper research is performed so you do not run the risk of loosing your Ohio Lien Rights due to any missed deadlines or inaccurate information.

CRM Lien Services will thoroughly research and verify all of the information included in your Affidavit of Mechanics Lien, Notice of Furnishing and Notice of Commencement so your Lien Rights are fully protected. CRM keeps current with the changes to the Ohio Lien Law so your notices are prepared according to the latest statutes.

If you would like a proposal for our services: Funds-Trapping-Notice-Texas

Which Documents are required Prior to Filing a Claim of Lien on Real Property in North Carolina?

Are you participating in a construction project based in North Carolina, or have you recently furnished materials for a project with property in North Carolina? If so, you may be entitled to Mechanics Lien protection under the North Carolina Lien Law. Before you file a Mechanics Lien, it’s important to understand the basic provisions of the law and know the documents you will be responsible for Filing and Serving. The following are those you should be aware of in order to maintain your Mechanics Lien Rights in the state of North Carolina:

Claim of Lien on Real Property (known as a “Mechanics Lien” in most other states)

Any party in direct contract with the Property Owner can file a Claim of Lien on Real Property in the state of North Carolina. This includes General Contractors, separate independent contractors, and design professionals. The Claim of Lien on Real Property must be filed with the Clerk of the county in which the property is located within 120 days of the last date of furnishing labor and/or materials to the project. The Claim of Lien on Real Property must include the following:

  • Name and address of the person filing the claim
  • Name and address of the Real Property Owner
  • Description of the Real Property (street address, tax lot and block number, reference to recorded instrument or any other description of the real property is sufficient)
  • Name and address of the person with whom the claimant contracted for the furnishing of labor and/or materials
  • The date labor and materials were first furnished
  • The date labor and materials were last furnished
  • A general description of the labor performed on or the materials provided to the project AND the amount claimed

Notice to Mechanics Lien Agent (more commonly known as a “Preliminary Notice” in other states)

According to North Carolina Lien Law, all contractors and potential Mechanics Lien claimants must File and Serve a Notice to Mechanics Lien Agent to preserve their Lien Rights. This notice serves to alert the Property Owner of the claimant’s presence on the project. Property Owners in North Carolina are required to designate a Mechanics Lien Agent for construction projects where the total cost of improvement is $30,000 or more (excludes improvements to existing family residences). The Property Owner (or General Contractor on the Owner’s behalf) must designate the Mechanics Lien Agent within 7 days of contracting and post the Mechanics Lien Agent’s information onsite of the project.

The Notice to Mechanics Lien Agent must be Filed and Served within 15 days of first furnishing labor and/or materials to the project. This notice must be filed with the County Recorder and sent via certified mail, physical delivery with a proof of receipt, or by email with a delivery of receipt. It’s important to note that General Contractors do not need to file a Notice to Mechanics Lien Agent so long as the Mechanics Lien Agent information is in their contract.

Notice of Subcontract

All subcontractors, regardless of the party with whom they contracted, are required to File and Serve a Notice of Subcontract to the General Contractor within 75 days of the first furnishing of labor and/or materials to the project. If the Notice of Subcontractor is sent later or not at all, the subcontractor risks losing its ability to recover all of the amount owed to them.

Notice of Claim of Lien upon Funds (called the “Stop Payment Notice” in other states)

According to North Carolina Lien Law, if the Property Owner still owes money to the General Contractor and receives a Notice of Claim of Lien upon Funds by a subcontractor, the Owner cannot pay the General Contractor until the subcontractor’s Mechanics Lien is removed. The Notice of Claim of Lien upon Funds must be Filed and Served to the Property Owner, General Contractor and other related parties 10 days before recording a Mechanics Lien.

These are just a few key documents you will need to File and Serve in order to secure your jobsite accounts receivable in the state of North Carolina. For a more comprehensive understanding of the North Carolina Lien Law and all its provisions, choose a professional Notice of Preliminary Notice and Mechanics Lien Service to prepare and serve your North Carolina Notice to Mechanics Lien Agent, Notice of Subcontract, Claim of Lien on Real Property, and Notice of Claim of Lien upon Funds. Using such a service will ensure that the proper research is done so you minimize the risk of loosing your Lien Rights due to misinformation.

CRM Lien Services will thoroughly research and verify all of the information included in your Notice to Mechanics Lien Agent, Notice of Subcontract, Claim of Lien on Real Property, and Notice of Claim of Lien upon Funds so your Lien Rights are fully protected. We stay current with the changes to the North Carolina Lien Law so your notices are prepared according to the latest statutes.

If you’d like to request a proposal for our services, click here.