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If you’re a contractor, laborer, or material supplier in a construction project, you’ll probably need to acquaint yourself with the basics of mechanic lien.
Depending on your jurisdiction, the mechanic lien is also known as “construction liens” or “property liens.”
Without further ado, let us look at the top 5 things you’ll need to know about mechanics liens.
- Selected Items are Included in a Mechanics Lien
While mechanics lien is put in place to guarantee settlement, not all costs can be included for compensation.
While the exact rules will vary depending on your particular jurisdiction, mechanics liens generally cover for labor, materials, and services rendered to improve the construction project.
Contrary to what many believe, the mechanics lien will not cover items such as the attorney fee for filing the lien, punitive damages, emotional distress, or any other sort of qualitative damage, since these damages or fees do not add value to the construction project.
Broadly speaking, the amount of mechanics lien is only limited to the hard costs of improving the construction project.
- There’re Strict Time Limits for Filing a Lien
The particulars of mechanics lien are state-specific and vary considerably between states, and this is particularly true when it comes to the time limit of filing the lien.
In New York, for instance, it’s required that you file your lien within eight months, while in Pennsylvania; you’re required to file the mechanics lien within six months.
Whatever the state you are in, understand that there’s a time limit for filing the law, and it’s therefore prudent that you consider the local laws and practices.
- Not Everyone Can File a Mechanics Lien
A mechanics lien is quite selective, regarding who can and cannot file it. The mechanics lien identifies the parties who can file a lien as claimants.
Ideally, a claimant should have a contract with the project owner or should have a sufficiently close relationship with the contractor who has a contract with the project owner.
Broadly speaking, here’s a list of all the potential claimants who can file a mechanics lien:
- General contractor
- Sub-contractor to the sub-contractor (sub-sub)
- Material supplier with an agreement to the general contractor or sub-contractor
NB-Any potential claimant below a sub-sub is not legally permitted to file a mechanics lien.
- Mechanics Lien Has Limitations
The mechanics lien can only go far in guaranteeing settlement.
For starters, the mechanics lien cannot be filed on a public project as a matter of law.In any case, the public projects usually offer labor and material payment bonds as security in exchange for giving up on the right to file the lien.
Another limitation is that sub-contractors and supplier cannot file the lien against a residential property if the owner has paid the general contractor the full contract price.
Still at the limitations, most of the states will render a mechanics lien void, if the claimant cannot prove or rather did not send a preliminary notice to the construction project. A preliminary notice is a file created by the general contractors, subcontractors or suppliers. Not to file a mechanics lien but to have the right of filing a mechanics lien.
- Mechanics Lien Can be Filed Even after Completion of a Project
It’s possible for a contractor to file a mechanics lien even after the full completion o the project if they’ve not been paid in full.
It’s therefore essential that you communicate with your construction team to ensure all outstanding payments are made.
While filing a mechanics lien seems like an easy and straightforward process, there’re often little details that you may miss and deny you the right to collect payments. This is why we suggest that allow the National Liens & Bond to handle the process for you.