Regardless of where you live, if you work in the construction industry, at some point you’ll need to file a mechanics lien. In those cases, it’s a good idea to be familiar with the laws of the state you’re working in so that you know when deadlines are approaching and when you need to take action. Make sure you pay attention to these seven things when filing a lien.
- Licensing: If you’re working in a different state than normal, make sure you’ve complied with the state’s licensing requirements. If you don’t, you probably won’t be able to file a lien on a project, even if you’ve done the work. When you first start your construction career, and any time you do work in a new state, make sure you pay attention to the licensing rules. As a construction contractor, you may be prevented from doing any work at all if you’re not properly licensed, repay monies already received, or even pay a fine for working without a license.
- Corporate Details: Depending on the state you’re working in, your liability and responsibilities may change depending on how your entity is set up. If you’re working on a significant project out of state, you may need to file as a foreign corporation with the Secretary of State’s office before you conduct business in the state. This is a great time to look up the rules the state has for licensing and filing liens so that you’re familiar as they can vary significantly by state.
- Lien Laws: You need to be familiar with the lien laws for the state you’re working in and the project type you’re working on. While every state has a form of mechanics lien or bond claim in the state laws, the notice, notification, and filing requirements can differ. Pay attention to whether preliminary notice is required and when, who must receive that notice, and how to deliver it in order for it to be valid.
- Indemnification: There’s probably an indemnity clause in your various construction contracts, but it pays to understand how they behave. Indemnity is when one party is responsible for providing protection to another against legal or financial expenses. More importantly, you need to know the state’s laws regarding limits on indemnity so that you know whether the clause is valid.
- Prompt Payment Laws: In addition to mechanics liens, many states have prompt payment laws which dictate when laborers and suppliers must be paid for work (instead of a contract dictating these terms). These payment deadlines generally vary depending on the type of project and who is responsible for paying, but they’re important to know because they control when a payment is due in those states and tell you when the payment is overdue.
- Details on the Lien: State laws often contain guidance as far as what details need to be included on the lien, but a good rule of thumb is that the lien should include enough detail that someone who is not familiar with the situation could read your lien and understand what has happened and how to fix it. You should also check with the local register’s office in order to make sure your lien complies with any local details such as number of copies and filing fees.
- Make a Note to Follow Up: Mechanics liens are good for different lengths of time in different states. It could be anywhere from a few months to a few years. Know what that timeframe is and make a note in your calendar to start pursuing collections actions before that time frame expires.
If you’d like help with any step in this process, from familiarizing yourself with the state’s laws, to developing forms and contracts, to filing and pursuing a mechanics lien, give the lawyers at National Lien & Bond a call. With experience and local counsel in all 50 states, we can help you anywhere your construction career takes you.