Why You Should Be Wary of DIY Mechanics Lien Processes

Why You Should Be Wary of DIY Mechanics Lien Processes

A simple Google search for “mechanic lien forms” returns a large amount of results, many of which are companies selling do-it-yourself mechanic lien and notice forms. These forms are generally provided in a pdf or word format, and can be filled in by the purchasing company, saved, and re-used whenever a notice or lien must be sent and/or filed.

Many of the companies who choose to go the “do-it-yourself” route with these documents, however, don’t understand that the proper preparation of a mechanic lien or preliminary notice form may not be as easy as it sounds. This isn’t because it takes a brilliant legal mind (or any legal mind) to understand how to fill in the blanks – it certainly doesn’t – but because preparing these documents is time-consuming and requires strict adherence to certain specific procedures and requirements. Some examples of potential difficulties are discussed below.

Since mechanics liens encumber the property against which they are claimed, laws throughout the country require that the property subject to the lien must be clearly and specifically identified. This generally results in the requirement to identify the property with more than it’s municipal address; nearly always, this is accomplished by using the property’s legal property description.

A legal property description is:

a written statement recognized by law as to the definite location of a tract of land by reference to a survey, recorded map or adjoining property.”                   (from: Glossaries of BLM Surveying And Mapping Terms, Second Edition, 1980.)

In order to prepare most mechanics lien forms (and even some preliminary notice forms) properly, the legal property description must be included. This requires research, which, in turn, requires time and at least some specialized knowledge. Learning how to research legal property description, or hiring someone who knows how to do so, is critical to properly identifying the property subject to a mechanics lien, and therefore, is critical to the validity of the lien itself.

Proper Filing and Service

As noted many times in multiple articles throughout the Construction finance Journal, there are many strict requirements for mechanics liens. These requirements do not only have to do with the content of the document, as discussed above. There are also strict rules for where the document must be filed, and upon whom the document must be served (and by what method). Assuming the document has been completed properly, the next step is getting the form filed and/or delivered to the right places, in the statutorily required way.

Is Filing Required? In What Office?

While mechanics liens nearly universally require filing, most notices do not need to be filed. However, there are some notices, in some situations, that must be filed, as well. The location in which these documents must be filed varies by state, and depends on the particular state’s requirements. Normally, these type of documents are filed with the county recorder, or the Clerk of Court for the county in which the project ocurred.

Who Must Be Served?

The filing of the lien (or notice) does not usually end the process. Most states require that the lien be served upon certain interested parties, including the property owner, the lender, the prime contractor, and/or those other parties up your contracting chain. Service can sometimes be through the mail, but other times require delivery by a courier or sheriff. Knowing what service is required and how it must be done is critical to correctly filing the lien.

How Is Preliminary Notice Required to Be Sent?

Most states require some sort of preliminary notice. Almost always, the state also mandates a specific way in which the notice must be sent. Most of the time, the notices are to be sent certified mail or certified mail with return receipt requested. But, there are always exceptions. Sometimes, the notice must be sent restricted delivery, sometimes registered mail, or sometimes by common courier (like FedEx) or hand-courier.

Proof of Delivery?

Once the notice has been sent, specific proof of the sending and/or receipt may be required. The type of proof needed depends on the particular situation, the return receipt green card (or electronic green card) may be enough, or an affidavit of delivery or some other proof may be required.

Little Mistakes Can Invalidate a Lien

While the mechanics lien laws were put in place to protect construction industry participants form the risk of non-payment, the lien laws are very strictly construed. Because of this, many states will invalidate a mechanic’s lien or preliminary notice if there is some defect in its content, filing, timing, or service.

The cost of these mistakes can be significant, even if the mistake is minor (or seemingly insignificant). Since there are so many intricacies involved in the filing or delivery of lien and notice documents, it can be a costly mistake to buy a simple do-it-yourself form and try to maneuver through these mazes of requirements.

Technology Can Help

Luckily for the potential lien claimant, software platforms can remove the difficulties from the process of sending, filing, and serving construction notices and mechanics liens. This software can automate and streamline the process, and ensure that the nuances and specifics associated with each state’s law are complied with. Learn more about how smart automation software platforms can optimize your process, provide you with more control, and empower you to make strategic decisions regarding your security rights by requesting a demo at the link below.

Why You Should Be Wary of DIY Mechanics Lien Processes

 

, , , ,