FAQ: Must Mechanic Liens Be Released, Or Can I Just Let Them Expire?

FAQ: Must Mechanic Liens Be Released, Or Can I Just Let Them Expire?

Short Answer: It’s much better and safer to formerly release your mechanics lien claim if you don’t intend to enforce it.

Long Answer:  As we’ve found from conducting a survey of mechanics lien claimants, most mechanics lien claims are paid without the need for a foreclosure or enforcement action. However, some liens aren’t immediately paid.  And since all mechanic liens expire after a statutory period, that leaves the lien claimant with a decision:

– Should I and Can I File A Mechanics Lien Extension?

– Should I File A Lawsuit To Enforce The Mechanics Lien?

– Should I Give Up And Let The Mechanics Lien Claim Go?

This blog post focuses on this last option, letting the mechanics lien go.

Reasons To Let Your Mechanics Lien Claim Go

Mechanics lien claims are fantastic, they usually result in payment, and if they don’t get you paid, there are lots of reasons to proceed with a foreclosure action and be optimistic about payment.  Sometimes, however, you just want to give up on the claim.

Why?

Well, maybe the value of the mechanics lien isn’t big enough to support legal action, or to put it more simply, the “juice isn’t worth the squeeze.”  Or, maybe you have a great relationship with a contractor who can’t get money from a property owner, and you decide to just not pursue the claim.

Sometimes, its just the right decision to give up on a particular claim or debt and move on to greener pastures. If that’s your decision, you may need to handle your mechanics lien claim.

Formal Cancellation of Mechanic Liens Required Even After Expiration

In most circumstances, it is highly advisable to formally release a mechanics lien claim if you do not intend to pursue it.

There are some states that absolutely require the formal cancellation. These states have laws on the books that require lien claimants to actually file a “lien release” document with the recorders office after a mechanics lien expires. There isn’t a real enforcement mechanism to these laws, except that a property owner could later file a lawsuit to have the lien removed and cite the claimant’s failure to release it.

The states that do not have a formal cancellation requirement written into its statutes, however, are not much different from those that do.

After a mechanics lien expires, the claim itself is not automatically stripped from the county’s records, because that’s just not how county recorders work.  County recorders record things, they don’t ever un-record things. Even a cancellation or release is a recording, not an un-recording.

Anyone doing a title search will stumble upon the mechanics lien filing, even if it is expired. And even though the lien claim may be legally expired, the title searcher will not feel comfortable with the existence of this document unless a cancellation is lodged.  Really, there is good reason for this, as there isn’t a way for the title searcher to know if the document was enforced or not!

So, the property owner will – at some point or another – need that mechanics lien document off the books. The property owner may ask nicely that you do this, or they may file a lawsuit to have the mechanics lien document formally released…and when they do file this lawsuit, it will be against the lien claimant and allege that since the lien is still of record and formally expired, it is “frivolous” and “slandering title.”

You’ll lose this court battle and you may be responsible for costs, attorney fees, and possibly statutory penalties!  It’s a terrible situation to be in and one very, very easily avoided. If you’re giving up on a mechanics lien claim and not pursuing it, release the mechanics lien.

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Scott Wolfe Jr

About Scott Wolfe Jr

Scott Wolfe Jr. is the CEO of zlien, a company that provides software and services to help building material supply and construction companies reduce their credit risk and default receivables through the management of mechanics lien and bond claim compliance. He is also the founding author of The Lien and Credit Journal, a leading online publication about liens, security instruments and getting paid on every account. Scott is a licensed attorney in six states with extensive experience in corporate credit management and collections law, with a specific emphasis on utilizing mechanic liens, UCC filings and other security instruments to protect and manage receivables. You can connect with him via Twitter, LinkedIn and Google+.

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