We all agree that the construction lien is virtually the best tool to guarantee payment on construction projects. But like many other statutory creations, there are plenty of dos and don’ts. Many mistakes are made on a daily basis by contractors filing liens, and these errors cause considerable damage. Therefore, pay careful attention to the details of the top 10 construction lien errors. This information will be quite essential for you to avoid such mistakes.
- Right to Lien
It is important to note that there are requirements and exceptions for filing a construction lien. Just because you are unpaid for a construction project does not mean that you are allowed to file a lien.You need to ensure that the work qualifies to be protected by a construction lien. You may also be required to send a preliminary notice before filing the construction lien. It is also crucial to ensure that you are well-licensed before filing your claim.
- Failing to File the Lien on Time
It is wrong to think that you have time on your side. Each state has a specific number of days within which to file a lien. A construction lien that is filed late may either be rejected by the clerk or may be found be inaccurate. To prevent missing out on the deadline, you are advised to file your lien as early as possible.
- Missing Important Details
The construction lien must feature some specific details which must be correct. Each state requires its technical details to prove the validity of the claim. Make sure that you correctly state the date when you issued a notice, the last date of the project, and any other dates that may be required.
- Listing the Wrong Owner
This is a frequent error especially by those who do not take their time to verify the rightful legal owner of the property. By failing to name the right owner on the construction lien, the claim will be found invalid.To correct this, you must use the title company to verify the legal ownership of the project.
- Describing an Incorrect Property in the Construction Lien
Most contractors know the importance of correctly describing the property in the construction lien. However, most contractors file the wrong property information. This may be regarding an incorrect property address, block, or section. To avoid this, you need to have the title company which is necessary to verify and validate the property information.
- Exaggerating the Amounts Owed
A claimant deserves to be paid for the value of all materials and labor provided. The lien should only reflect these values, and you can’t inflate or exaggerate that claim. Exaggerated claims may result in sanctions or may lead to criminal charges at certain times.Make sure to claim only the amounts that you are legally owed.
- Failing to Serve the Construction Lien by the Proper Method
There is a very particular and proper method of serving the construction lien as stated in The Lien Law. You can either serve the lien by a certified mail and a return receipt requested, or by hand. You need to understand and follow the proper methods at all times when serving the construction lien.
- Waiting for Payment Promises
One of the greatest errors you can make is failing to serve the construction lien because of the owner’s repeated claims to pay off the debt. You should never feel guilty when filing or serving a lien. Always remember that you have the sole purpose of protecting the interests of your business and that of your employees. Why should you wait? This is purely business.
- Failing to Serve the Required Parties
For your construction lien to be effective, you must ensure that you serve all the proper parties. As a minimum, you must make sure to serve the general contractor and the owner of the property. If you are a lower level subcontractor, you must serve a copy of the lien to all the contractors above you on the contract chain.
- Letting the Lien Expire
You may have done everything right. You served all the notices, filed the lien, and ensured you got all the vital information right. All these may sound like good news. But your lien does not last forever. You need to foreclose the Claim of Lien within the specified time. Beyond this specified time, your claim will not be valid.
The consequences of making an error when filing a construction lien are far too extreme. Ensure that you have all your details right and remember you can always seek counsel from an accomplished lien lawyer whenever in doubt.