File A Lien Or Go To Small Claims Court?

File A Lien Or Go To Small Claims Court?

Scouring the Internet one night I came across this article from Remodeling magazine published in 2010: Lien Times: Use Liens Sparingly and Carefully.  Warning that “the lien conversation throws the relationship into chaos,” the author advises contractors to think long and hard before filing a mechanics lien, and then recommends a small claims court suit instead:

A small claims court case may be a more efficient and cost-effective method of collection than the lien process for some contractors.

I couldn’t disagree with the author more.

Small Claims Court Is No More Friendly Than A Lien

It’s funny how the author talks about a mechanics lien as “throw[ing] the relationship into chaos” but then recommends filing a small claims court action as if the two are so different in terms of preserving a relationship.

The logic is missing here. If you’re in a small claims suit with your customer, your customer is going to be just as upset at you as they would be in a lien action. The only difference is that in a lien action you’ll have security to get paid, and in a small claims action you won’t.

The First Rule of Small Claims Court Is That There Are No Rules

Small claims court is great because its cheap, its quick, and it usually doesn’t require lawyers. Here is something you may be overlooking, however: there usually aren’t any rules.

The lack of rules is good to a degree, as it enables the process to be quick, cheap and easy. The problem is if you’re on the losing side of the case, because you’ll be unable to appeal the decision and the decision may be based on the judge’s feelings as opposed to the hard facts.

Everyone who walks in small claims court thinks they are right. I can’t tell you the number of times I’ve seen a contractor or suppliers real, provable debt get tossed in small claims court because the property owner had a better sob story.

Fact Is That Mechanics Lien Usually Offers Fast Payment of Debt

There are certainly scenarios when a mechanics lien does not get you paid immediately and you’re stuck having to proceed to have the lien enforced. That happens. It’s much more likely, however, that your mechanics lien claim will prompt one of the other project participants or the property owner to arrange for your payment, and to do it quickly.

When this happens, you get paid quicker and with less effort than you would with a small claims court action.  When this doesn’t happen, you at least have security you can enforce.  And that’s almost always better than a small claims court judgment.

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  • http://constructionlawva.com Christopher G. Hill

    Scott, great post and I agree that a memorandum of lien is no better from a chaos perspective than is a lien. However, should the need arise to enforce a smaller claimed amount that was liened, it is possible to outstrip the amount to be collected with the attorney fees necessary for the lien enforcement battle. This is something that must be taken into account in my mind.

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  • Eleanor Funk

    What if we filed a mechanics lien, can we then take them to small claims court? We were on a time crunch and filed the lien to help protect us.

    • http://www.zlien.com Scott Wolfe Jr

      Eleanor, thank you for visiting the blog and for your comment. The answer to this question is a bit complicated and it depends – among other things – on the state where you filed the lien. However, many states prohibit liens from being foreclosed upon in small claims court. The reason is that small claims courts have a jurisdictional limit (often $5k – $10k), and while your claim may be under this amount, the total value of the case requires the foreclosure of a property which is valued at more than this amount. Therefore, small claims courts stay away from these cases. This is certainly the case in California, for example, as you can read about in this article: Can A California Mechanics Lien Be Foreclosed Upon in Small Claims Court?

      Good luck.

  • Dave Woodward/Pensacola

    Small claims decisions are appealable in Florida: there is no “small claims court” in Florida. County Court has split rules: a claim $5000 and less is under the “small claims rules” and above that controlled by the Florida Rules of Civil Procedure. Because County Court is a court of record, anything can be appealed to the Circuit Court. If appeal is anticipated, take a court reporter.

    • http://www.zlien.com/ Scott Wolfe Jr

      Dave, thanks for reading and for your comment here. This is likely in response to my Avvo.com answer :) – of which, I’m happy to see some Florida-specific information from someone in that state.

      That’s an interesting approach in Florida to split “small claims” from regular claims within the same county court…and to preserve the ability to appeal small claims court rulings.

      I have an inquiry about how something may work in the state, however.

      When a mechanics lien is filed in Florida, it may be less than a $5,000 claim. Since the claim is less than $5,000, it may seem to qualify for a “small claim” in the county court, and to be regulated by the <$5000 claim rules.

      However, the claim itself may be to foreclose on the mechanics lien claim, which will necessarily involve the foreclosure on some type of immovable property. The immovable property will very likely exceed $5,000 in value.

      So, what happens?

      Can a foreclosure of immovable property that is likely valued in the 6 figure range or higher actually be litigated under the "small claims rules?"

      My suspicion is that it cannot be. The lien claimant can go to court and file a contractual claim under the small claims court rules, but I suspect that once the lien and property is tied in, and foreclosure is sought, the jurisdiction of the small claims rules will be tested.

      Any cases on this, or any thoughts on this?