Regardless of where you live, if you work in the construction industry, at some point you’ll need to file a mechanics lien. When that happens, it’s a good idea to be familiar with the laws of the state you’re working in so you know when deadlines are approaching and when you need to take action. Do not assume that the laws of the state you’re working in are the same as the laws in your home state. And make sure to 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 guest state’s licensing requirements. If you haven’t, you probably won’t be able to file a lien, even if you’ve done all the 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. Not only that, but if you work without a license, you could be subject to a misdemeanor conviction, a fine, and even incarceration.
- Corporate Details: Depending on the state you’re working in, your responsibilities and personal liability are based on how your entity is set up. If you’re working on a project out of state, you need to register your company as a foreign corporation with the Secretary of State’s office before you begin work. This is the time to look up the licensing, registration and lien rules for the state.
- Lien Laws: Every state has specific forms to file a lien or make a bond claim. Notice, notification and filing requirements vary widely. Pay special attention to whether and when a preliminary notice is required, who must receive it and how it must be delivered.
- Indemnification: There’s probably an indemnity clause in your various construction contracts. It pays to understand how your indemnity clause works. Indemnity is when one party is responsible for providing protection to another against legal fees or expenses for damages. You need to know the state’s laws regarding indemnity clauses and any state limit on indemnity. In some cases your indemnity clause may not be valid.
- Prompt Payment Laws: In addition to the protection of 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 vary depending on the type of project and who is responsible for paying. They’re important to know because they control when a payment is due and when it is overdue.
- Details on the Lien: State laws are your guide to what details must be included when filing a lien. A good rule of thumb is to include enough detail so that someone who is not familiar with the situation can read your lien, understand what has happened and take action to fix it. You should also check with the local register’s office in order to make sure your lien complies with any local requirements, and to find out the the amount of filing fees and the number of copies needed.
- Make a Note to Follow Up: Mechanics liens are good for different lengths of time in different states. They can be valid anywhere from a few months to a few years. Know what that time frame 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 a state’s laws, to developing forms and contracts, to filing a mechanics lien, to foreclosing on the lien, to indemnity issues, give the lawyers at National Lien & Bond a call. With experienced local counsel in all 50 states, we can help you anywhere your construction career takes you.