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In this blog, we will debunk some prevalent myths associated with mechanic's liens, an help you understand this payment tool better. Read on!
Myth #1: Any Contractor or Supplier can Claim a Lien
Contrary to popular belief, only those contributing labor or materials to a real property project are eligible to file a mechanic's lien. While specific requirements vary by state, they typically encompass general contractors, subcontractors, suppliers, and material providers.
Myth #2: You can file a Mechanic's Lien at any time
There exists a time limit for filing a mechanic's lien, varying from state to state but generally falling between 90 and 180 days after the last day of work or material delivery.
Myth #3: You can waive your right to file a Lien in a Contract
This is untrue in most states, where attempting to waive the right to file a mechanic's lien through a contract is likely to be deemed unenforceable and, in some cases, illegal.
Myth #4: Filing a lien guarantees Automatic Payment
Contrary to misconception, filing a mechanic's lien does not assure payment. It grants a legal interest in the property, requiring potential court involvement to foreclose on the lien and facilitate the property's sale to recover the debt.
Myth #5: Mechanic's Liens are expensive and time-consuming to file
Contrary to popular belief, resources are available to streamline the filing process. Numerous states also offer free or low-cost assistance programs to simplify the mechanic's lien filing procedure.
Myth #6: You can only file a Mechanic's Lien on a house
Mechanic's liens are applicable to various real properties, including commercial buildings, vacant land, and public property.
Myth #7: You need to be a Licensed Contractor to file a Mechanic's Lien
Licensing requirements vary by state, with some necessitating a license for filing, while others allow anyone contributing to a project, regardless of licensing status, to file a lien.
Myth #8: Filing a Mechanic's Lien forces automatic payment from the Property Owner
Filing a lien does not guarantee payment; the property owner can contest it in court. If the court deems the lien invalid, collecting the debt becomes challenging.
Protecting Yourself from Nonpayment – Best Practices
If you are a contractor or supplier, take these steps to protect yourself from nonpayment and avoid common mechanic's lien mistakes:
Get everything in writing: Have a signed contract outlining the scope of work, price, and payment terms.
Keep good records: Document all work and expenses, retaining receipts for materials and supplies.
Send timely invoices: Regularly submit invoices, typically monthly, to the property owner.
File a Mechanic's Lien promptly: If unpaid, file a mechanic's lien soon after the project's completion.
Consult with an attorney: Seek guidance from a construction law specialist for any questions or assistance in filing a lien.
Understanding the intricacies of mechanic's liens and filing them correctly is crucial for contractors and suppliers. By dispelling common myths and avoiding pitfalls, the likelihood of receiving payment for work and materials significantly increases.
Have questions? Call us at 800-403-7660 to speak with one of our experts, and stay ahead in managing your construction payments.
