To begin, we need to understand that filing a “Mechanics Lien”, while being a necessary step in the recovery of your unpaid accounts receivables, is not an end in itself. Once the mechanics lien is recorded and served, the clock starts ticking, you have a limited number of days to take the next action. If your time runs out and you do not take the required action, your mechanics lien will expire and no longer be valid as a basis to collect your money. Most states allow 90 days to take action once the mechanics lien is filed and served. (Not 3 months, 90 consecutive calendar days). For the exact days required by each state, use the free CRM 50 State Guide.

Key Takeaways

• Timely Action Required: Once a mechanics lien is recorded, you have a limited number of days to take further action, typically 90 consecutive calendar days, to maintain its validity.
• Accurate Lien Amounts: Only claim the amount of unpaid receivables in your lien. Including unauthorized charges or unrelated costs can lead to the lien being invalidated.
• Avoid Unconditional Releases: Signing an unconditional final release of lien rights ends your ability to claim a lien, shifting recovery methods to breach of contract suits or other collection methods.

So the lesson here is: Avoid allowing these 90 days to elapse with taking action.

(CRM offers “eAlert Unlimited” to assist you with preventing this failure to take action from happening)

The next thing to avoid is: “Greed”. You may only claim a lien for the amount of your unpaid accounts receivables earned on the construction project. Do not add any extras! i.e.: Finance Charges, other monies owed to you by the same client, or losses* on the job which are not covered by the Lien Laws. You may always ask for these compensations during a foreclosure law suit. However, unless your client has formally approved your agreement to charge a rate of interest on outstanding balances which are beyond terms, then don’t arbitrarily add these to the lien.

Here is why you should avoid these practices: The opposing counsel will perform a series of test to attempt to find defects in your mechanics lien. If they succeed, they will ask that your lien be removed with prejudice ( once removed you cannot reinstate it ). Typical defects are; non compliance with the statute, incorrect amount being claimed, or lack or eligibility to claim a lien. (see blog “Preliminary Notices – what to avoid”)

• an example of losses which may not be included in your lien is the replacement cost of rental equipment. If you are providing a backhoe to a project at a rate of $700.00 per week and the backhoe is damaged or stolen from the job. You may only claim a lien for the earned rental income. The value of the backhoe may then be recovered under the liability clause of your insurance, or the Damage Waiver Insurance offered by the provider of the backhoe.

The last thing to be sure to avoid is the signing of any “Unconditional Final” release of lien rights. Once this type of release is surrendered, your right to claim a lien has ended. Your recovery method will then resort to a breach of contract suit with the party whom you contracted with to perform the services or provide the materials, or other methods of collections.

To learn more, or if you have questions regarding your company and the services or materials you provide to Improvements to Real Property. Choose the following link for a free consultation.