Arizona (Photo credit: Moyan_Brenn)

Earlier this week, a subcontractor in Arizona posted a question on Avvo.com about whether he should or should not wait to send a 20 day preliminary notice. The resounding answer from me and other Arizona attorneys was “No, never wait.”  Why did we respond in this way?  Is it the right response?  Is there ever a reason to wait?

20 Days Goes By Fast And You Don’t Want To Argue About Timing

One reason why everyone answered that you should never wait to send a preliminary notice is that the time period to send these documents is very, very fast.  Twenty days.  Twenty days goes by quick.  And since weekends, holidays and other distractions count, you may actually be surprised at how quickly 20 days passes from when you start a project.

This is especially an issue with the recent changes to the USPS delivery and pickup schedules, as the preliminary notice deadline will not wait for the USPS.

Not only does the time go by fast, but the last thing you want to do is get engaged in an argument about whether your preliminary notice was delivered on time. If the final delivery date is close to the 20 days, you can expect argument. Argument equals litigation costs and risk of loss, regardless of whether you are right or wrong.

Avoid this by sending your notice immediately.  There is no harm.  At all.

Should You Delay Sending Preliminary Notice If You Expect Contract Conditions To Change?

This was the circumstance faced by the questioning subcontractor in Arizona. They expected a change order or contract change within a short period of time that would increase their contract amount by 40%.  Since they are in Arizona and Arizona has the “20% Rule” for preliminary notices, the questioning party wondered whether it would just be worth it to wait for the contract to be changed to send a single preliminary notice for the entire thing.

The 20% Rule in Arizona is applicable, and is unique to Arizona. No other state has anything like this – even California, whom after the Arizona legislature modeled its lien laws.  The rule states that if you estimate your contract total to be one amount and the amount eventually exceeds that figure by 20% or more, you’ll need to send a supplemental notice for the additional amounts.

Nevertheless, the fact that you may need to later send a supplemental or amended notice is no reason to delay sending your original notice.

The amended notice will not travel back in time to attach to the original furnishing you made.  You must send your preliminary notice immediately.

Wait Until The Last Minute To Avoid Customer Getting Upset?

The final reason why a company may postpone sending their preliminary notice is a concern that sending this notice will upset their customer.  This should not be a concern.

As we’ve written about in the past, sending a preliminary notice will not scare or upset your customer. Your customer gets hundreds of these notices, and they are mandated by law.  Plus, the period of time you’ll be waiting is pretty short, and it’s not likely the waiting is going to make any difference.

Written by Scott Wolfe Jr See original article at Should I Wait To Send My Preliminary Notice? Originally posted on the LIEN

Habitat For Humanity volunteers constructing a house during the 2007 Fremont Fair, Seattle, Washington. The house would later be moved to Snoqualmie Ridge in Seattle’s eastern suburbs. (Photo credit: Wikipedia)

Last week, someone in Oregon posted a question on Avvo.com inquiring whether a mechanics lien can be filed against a non-profit project – specifically a Habitat for Humanity project. This is a frequently asked question because the non-profit nature of these projects can create confusion.  What type of project is it?  Can you lien an organization that has non-profit status?

This post answers these questions with a simple and resounding yes.

A Non-Profit Doesn’t Get Special Legal Treatment  Under Mechanics Lien Laws

Non-Profit organizations get special tax treatment, but they do not get special legal treatment. They must follow the laws like any other commercial enterprise, and that is especially true for mechanics lien claims.

We wrote about the non-profit’s susceptibility to mechanics lien claims in a previous FAQs post: Can You File A Mechanics Lien Against A Non-Profit?  In that post, we explained that a non-profit project is simply a commercial construction project, subject to mechanics lien claims as if it were a McDonald’s building.

Habitat for Humanity is a great charity. In fact, I’ve previously done some volunteering for the organization. Nevertheless, if they owed money for materials or labor, the parties owed the cash would be able to assert a lien claim against the property.

Written by Scott Wolfe Jr See original article at Mechanics Lien Against Habitat For Humanity And Non-Profit Projects? Originally posted on the LIEN

Earlier this week someone asked a question on Avvo.com about whether a mechanics lien would be effective if filed after ab original owner sold the property. This is a great question that comes up pretty infrequently, but depending on the applicable state law, may be a great illustration of how effective and dangerous mechanics lien claims can be.

Most States Will Hold A New Owner Responsible For An Old Owner’s Mechanics Lien Claim

All state laws require that mechanics lien claims be filed within a defined period of time, and when a claim is filed it impacts the title to the underlying property.  What happens if the property owner who commissioned the construction work sells the property to an unsuspecting third party before the mechanics lien claim is filed?

If the mechanics lien claim is timely filed, most states have little sympathy for the third party buyer. The claim is usually effective against the property, and the third party must seek his or her remedy from the original owner who sold them the property.

There are some exceptions, which fall into two categories.

Some States Restrict Liability of Third Party Buyers

Illinois is a state that directly restricts the liability of third party buyers.  There are actually two mechanics lien deadlines within the state’s legislation.

The first expires within 4 months after the claimant’s last furnishing.  All liens filed within this period are effective against the property no matter what, which means that a third party buyer could be responsible for a previous owner’s unpaid work.

However, a second lien deadline expires 2 years after the claimant’s last furnishing. All liens filed after the 4 month deadline but before the 2 year deadline are enforceable against the original owner’s interest in the property only.

Unpaid Lien States Restrict Liens To Value of What Owner Still Owes

Some states restrict the value of a mechanics lien claim to the amount still withheld by the property owner. While this may not directly impact whether a lien is or is not effective against a third party owner, it has a lot of indirect implications.

One such state is New York. While a mechanics lien can be filed in New York at anytime within 8 months after last furnishing to the project, the lien is only effective as to the dollars still controlled by the property owner and yet to be paid to the general contractor.

At a practical level, a property owner selling a property to a third party usually has already paid out the entire contract amount to the prime contractor and thus insulated the property from a lien claim. If he or she has not, the third party buyer would have a very good claim against the owner because the owner would likely have made some type of misrepresentation in the documents.

Written by Scott Wolfe Jr See original article at What If Your Mechanics Lien Is Filed After The Owner Sells The Property? Originally posted on the LIEN

A few months ago I wrote a blog post titled “Beware of Bad Mechanics Lien Information Online.” It was to make a point you’ve probably heard before about a lot of topics, and that is that you can’t always trust information you find on the Internet.

This is especially true for mechanics lien information because lien laws are so convoluted it’s tough to get the data right. You wouldn’t expect this to be true about content published by lawyers, but unfortunately, the same warning applies.

People who have law licenses do not know everything about the law. Regarding mechanics lien laws specifically, lawyers without much experience in the area are usually lost at sea when it comes to understanding the complex legal landscape.

A question and answer on Avvo.com inspired me to write this blog post.  A contracting firm asked this question on the Q&A site:  ”How can filing a mechanic’s lien help in collecting fees for construction work done?”

Joseph Clark Melino, an attorney in San Jose, California, who claims 45% of his workload is related to construction matters, provided an answer that I strongly disagree with:

Your use of the mechanic’s lien laws to assure payment could cost you more than the project… You may be better off to seek a recovery in the Small Claims court. Even if the limit there is now $7,500.

Let me issue a disclaimer about my commentary here.  In this particular instance, the questioner may actually be better off filing suit (maybe in small claims court) because he is probably well beyond his deadline to file a mechanics lien.

Nevertheless, Mr. Melino’s answer rubs me the wrong way because it downgrades the usefulness of the mechanics lien stating that “it could cost you more than the project” and “you may be better off in small claims court” than entertaining a lien claim.

I previously wrote some articles to dismiss these types of comments:

1) Lien Or Go To Small Claims Court?

Here is the most applicable comment from that article:

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 more quickly 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.

2) Most Mechanics Lien Claims Get Paid Without A Foreclosure Suit

This is a funnel I put together that visually demonstrates how your mechanics lien claim will likely be resolved.

Mr. Melino’s first sentence warns the questioning party about the costs of foreclosing on a mechanics lien.  This is putting the cart before the horse.  Way before the horse.

Sure, a mechanics lien can become expensive if you have to foreclose the claim. There are two reasons why you shouldn’t have this on your mind at all when it’s time to decide whether to file your mechanics lien claim.

First, because you don’t have to file the foreclosure action!  If the mechanics lien doesn’t work out you’re not forced to file the foreclosure action. You can dismiss your lien claim and deal with your claim however you want.

Second, because you probably won’t have to make the decision, as most mechanics lien claims are paid before foreclosure is required. Take a look at the lien claim funnel graphic we put together and published last week.  This is a good representation of how likely it is that your mechanics lien claim will require you shell out a lot of money foreclosing it.  You likely won’t have to file a foreclosure action because a mechanics lien works in tons of ways to get you paid.

Written by Scott Wolfe Jr See original article at Bad Mechanics Lien Advice And Information Is Easy To Find Originally posted on the LIEN

We’re a great fan of Avvo.com, an online directory of attorneys and legal information, and a place where you can go for free legal advice. In fact, we’ve integrated Avvo right into our LienPilot software, making it easy for clients to get legal advice and answers from attorneys at no charge.

Avvo collects Legal Guides published by attorneys on a variety of topics. Of course, mechanics lien law is a popular topic for those attorneys who practice construction law.  I, for example, have written a number of mechanics lien legal guides on Avvo.

Vincent Pallaci, a New York construction lawyer, has written 4 great legal guides on Avvo.com about mechanics lien laws in New York.  Here is a summary of those 4 guides.

New York Mechanics Lien FAQs

Start with the basics: Frequently asked questions about mechanics lien laws in New York.  Zlien has published its own set of frequently asked questions on New Yorks’ mechanics lien laws (as well as every state’s laws).  The Pallaci legal guide, however, is a great resource for anyone looking for the basics on New York’s lien laws.

Read the “New York Mechanics Lien FAQs” Legal Guide.

10 Reasons That A NY Mechanics Lien Is Defective

I like the way this legal guide is structured, as it gives good information about how to correctly file a mechanics lien by pointing out the most popular reasons a mechanics lien is filed incorrectly.  We do this frequently here on the Lien Blog and publish it under our “Common Mistakes” tag.

My favorite “no-no” is the simplest one on the list: “The mechanics lien identifies a post office box as the lienor’s address.”  This is my favorite because it is so easily overlooked. New York lien law requires claimants to identify their actual address and post office boxes are insufficient, but just imagine how many times this is overlooked.  Lots!  More great stuff within the article, which you can read here:  10 Reasons That A NY Mechanics Lien is Defective.

Bonding A Mechanics Lien in New York

If you file a mechanics lien, it can be bonded off.  As explained in a blog post some months back, this process gets a bad reputation but it isn’t actually that bad for the mechanics lien claimant.  It’s actually…good.

Nevertheless, this article discusses how folks in New York can bond off a mechanics lien, looking at the event from the perspective of someone who wants to get the mechanics lien off record.  It’s a great resource for this.  Read “Bonding A Mechanics Lien in New York.”

Lien Release Do’s and Don’ts

This is important.  If you’re a reader of this blog you know we’ve written about Lien Releases and Lien Waivers lately, as they’ve been popping up in cases across the country with contractors, suppliers and others getting the screws put to them based on lien waivers they have signed.

This legal guide is a great resource for folks in New York being asked to sign a lien waiver of lien release. Read “Lien Release Do’s and Don’ts.”

Written by Scott Wolfe Jr See original article at 4 Great New York Mechanics Lien Avvo Legal Guides Originally posted on the LIEN

Over the past few years, I’ve participated in an online community of attorneys at Avvo.com. It’s a community I highly recommend to other attorneys and to the public, as anyone can use the site to get free legal advice about anything. As a matter of fact, we’ve integrated Avvo directly into our industry-leading LienPilot application making it easy for anyone with mechanics lien questions to ask them to licensed attorneys and get responses immediately.

Enough background. I’m writing this post because I come across lots of questions from homeowners inquiring whether they “can be forced to pay for construction work and materials twice.” My answers to these questions (such as this recent one) always follow the same formula.  Here is that formula.

Generally, Yes, Property Owners Can Pay For The Same Services Twice

There are some states where the answer is no.  In states like New Jersey and Virginia, for example, mechanics lien claims are only effective against the property owner to the extend the owner is holding contract funds at the time the lien is filed.  The vast majority of states, however, do not follow this framework and hold property owners responsible for the entire value of a valid mechanics lien claim.

Generally speaking, therefore, a property owner may be forced to pay for the same services twice.  It sounds harsh and does result in some unfortunate consumer stories and violations, but the mechanics lien laws are designed to protect the big picture construction markets, and property owners are charged with the duty of making sure that when they pay their contractors they take precautions to ensure all subcontractors and suppliers’ claims are satisfied.

But, Make Sure The Mechanics Lien Is Valid

Of course, this is only true if the mechanics lien claim is valid. The property owner does not have privity of contract with subcontractors and suppliers, and accordingly, it does not have any legal obligations to these parties unless the mechanics lien is filed.  The mechanics lien is the instrument that creates the owner’s obligations to these parties.

Prior to paying these demands, therefore, property owners ought verify that the mechanics lien claim is valid.

This typically involves a check of two things:  (1) Was the mechanics lien filed on time; and (2) Did the claimant preserve its right to file the mechanics lien by sending a required preliminary notice?

Owners Can Seek Reimbursement From The Contractor

Does the owner just get screwed here? What is the owner’s remedy?

The property owner is not left dead in the water if forced to pay a mechanics lien claim and pay for services twice, but they are not in good shape.  The property owner’s remedy is to file a claim against their contractor to be reimbursed the amounts paid twice.  The trouble here is not a legal one (the claims are there, and they are very good claims).

The problem is a practical one, as this situation usually only occurs when a contractor has misappropriated funds, is having financial problems, or is committing fraud.  The value of a judgment against these parties is questionable. Some states have consumer protection funds available to property owners if they get burned by a contractor, but these states are in the minority and the fund always suffers from administrative and financial problems.

Written by Scott Wolfe Jr See original article at Yes, Property Owners Can Be Forced To Pay For Construction Work Twice Originally posted on the LIEN

Our blog’s readers should know I firmly believe that mechanics lien claims help companies get paid. When a mechanics lien is filed, it operates in multiple ways to increase pressure at the project to pay your debt. Reference a white paper we’ve published in the past titled: 5 Ways A Mechanics Lien Will Get You Paid.

One of the ways a mechanics lien gets companies paid is that it ties up the property, preventing the property from being bought, sold, transferred or refinanced. While a mechanics lien claim doesn’t last forever and does officially expire after a certain period of time in every state, a question I came across this morning on Avvo.com is a reminder that even though a lien claim “officially expires,” it could even continue to cause problems years later.

A property owner in Iowa posted this on Avvo:

i had a window and siding company (50 miles away) come to my house in 2004 and replaced both w and s. i was never happy with the job…i decided if they were going to ignore me then they weren’t getting paid. a few years ago i tried to refinance at my bank and found out the company put a lien on my house. now it’s 2012 and i’m wanting to sell. what can i do 8 yrs later to get this dropped…what can i do so i can sell and move?

Of course, the mechanics lien here is expired, and getting it removed would be a fairly easy affair (although one that requires the homeowner to hire and pay an attorney).  And of course, since the mechanics lien claimant hasn’t removed the expired lien, they do subject themselves to potential damages for the improper encumbrance on the home.

Notwithstanding those issues, it is interesting to see how much trouble this mechanics lien caused this homeowner.

The homeowner wanted to refinance a few years ago, but couldn’t. Now, the homeowner wants to sell the house and move, but is having trouble with that, too.

By no means am I advocating that mechanics liens should be filed improperly, or left on property too long.  Doing this opens yourself up to trouble and expense. But I think this story advertises how effective mechanics lien claims can be – even when they are statutorily ineffective, they are still causing problems for property owners.  When you’re unpaid, problems for property owners usually equals payment.

Written by Scott Wolfe Jr See original article at Mechanics Lien Wrecks Havoc On Property Owner 8 Years After It’s Filed Originally posted on the LIEN

Short Answer:  Probably, yes.

Long Answer:  I love Avvo.com, and frequently participate in that community of attorneys. A question was asked to the attorney world at large two weeks ago by someone in Seattle, Washington, that interested me. I planned to answer it on Avvo, but didn’t get around to it until it was too late. Unfortunately, the question went unanswered.  Here it is:

Do contractors have the right to put a lien on my property if they didn’t finish work?

Of course, this question is asked from the property owner’s perspective, and most everything on the Lien Blog is written from the perspective of lien claimants. But this is an important question here because it is one that implicates the claimant’s rights, and is a frequently asked question.

[pullquote style="left" quote="dark"]The rule is usually as simple as this: If the property is improved and the contractor isn’t paid for that improvement, there is a mechanic’s lien right. [/pullquote] As disclosed in the short answer above, it is highly likely that the contractor can file a mechanics lien even if the work is not completed. Most states allow contractors to file a mechanics lien for the value of their improvements to the property.  The rule is usually as simple as this: If the property is improved and the contractor isn’t paid for that improvement, there is a mechanic’s lien right.

Of course the contractor cannot lien for its incomplete work, because the property wasn’t improved for that incomplete work. However, just because the work isn’t completed doesn’t mean the contractor didn’t contribute an improvement for which the contractor is owed.

We wrote a similar FAQ last year called “Can I File A Lien If My Workmanship Is In Dispute.”  A dispute with a contractor for workmanship problems is a very close cousin to a dispute over the completeness of work.  The result in that situation is also close to the result here, which is that the mechanics lien can usually be filed.

Contrast this, however, with an exception that exists in some states like Iowa.

This past June, the Iowa Supreme Court decided Flynn Builders LLC v. Landes, and tossed a mechanics lien as improper because the contractor did not complete the work. As explained in that post, Iowa only allows contractors to file a mechanics lien if they “substantially performed” on the contract.

Absolute completeness is not required to file a lien in Iowa (and therefore, problems with workmanship or punch list items probably wouldn’t prevent a lien filing), but it is clear that unlike many states and contrary to the general answer to this FAQ written about here, a contractor in Iowa must complete – or substantially complete – the project to file a mechanics lien.

Written by Scott Wolfe Jr See original article at Can A Contractor File A Mechanics Lien If They Didn’t Finish The Work? Originally posted on the LIEN

Short Answer:  You can never be too early.

Long Answer: We recently had a client pose this question to us, and it’s not the first time.  I also saw a thread about this question on Avvo.com, and thought the answers there weren’t terrific (except for the one I posted there, of course).  So, I figured it was time for a frequently asked questions post on the subject.

[pullquote style="right" quote="dark"]So long as you have done the work, and are not paid, you have the right to file a mechanics lien as long as you have met any applicable preliminary notice and notice of intent to lien requirements.[/pullquote] Everyone knows (or should know) that you can absolutely wait too long to file a mechanics lien. Every state has different lien deadlines, and you are required to file your mechanics lien before the expiration of the designated period or the lien rights disappear.  But, is there some type of deadline on the other side, preventing you from filing a mechanics lien too early?

Almost without exception the answer here is no.  So long as you did the work and are owed the money, you can file a mechanics lien, and there’s no such thing as filing too early.

Here are some common issues that may delay you from filing your mechanics lien. While it may seem like these are restrictions on you filing “too early,” they are not actually this type of restriction. They are just pre-lien requirements, which means they must occur before you file the lien.

Notice of Intent To Lien

There are a handful of states that require folks to deliver a “Notice of Intent to Lien” before filing a mechanics lien. In most cases, this must be delivered 10-30 days before the mechanics lien claim is filed.  If you are working in a state that requires this, your lien will be invalid if you file it before you send off this notice.  In a sense, therefore, your mechanics lien is “early” if you file it before you send the notice of intent to lien.  While you may call it “early,” in reality it is not early, it’s just invalid.

We’ve written a post (click to read) listing the states that require notices of intent to lien.

Preliminary Notices

While only a handful of states require notices of intent to lien be filed, there are a lot of states that require preliminary notice. If you don’t send your preliminary notice, you may not have lien rights. Therefore, you cannot file a mechanics lien until the preliminary notice is delivered. If you do so, your lien is “early” because it is filed out of order…but really, again, it is not early but is instead simply invalid.

Texas is a state that requires all kinds of notices, which really operate in their own universe and are not easily classified as either “preliminary notices” or “notices of intent to lien.”  However, if you are required to send a Texas notice (and most folks are), you must send this notice before you file your lien. This, in fact, is the point of the question in the Avvo thread.  However, so long as you send the notice first, you’ll be okay.  The notice can be sent even just hours before, or minutes before…but it’s safest to send a day or more before just to clearly demonstrate the progression.

Do The Work First!

Here is an obvious one…you can’t file a mechanics lien before you perform the work.  This is a question presented to me before – someone actually wanted to file a mechanics lien at the moment they stepped on the project to protect their lien rights.  No can do.

You can only file a mechanics lien once you have the right to do so, and filing beforehand would be “early.”  Again, not really early, it would simply not be within your rights…but, in a sense, a filing before doing the work would be early.

Summary In One Sentence

So long as you have done the work, and are not paid, you have the right to file a mechanics lien as long as you have met any applicable preliminary notice and notice of intent to lien requirements.

Written by Scott Wolfe Jr See original article at FAQ: Can I File A Mechanics Lien Too Early? Originally posted on the LIEN

California’s preliminary notice requirement seems straight-forward enough: send preliminary notice to the property owner, the prime contractor and the lender within 20 days of first furnishing labor or materials to a project. As with everything in life, however, the devil is in the details.

This is the subject of a Legal Guide I published this morning at Avvo.com, titled:  3 Important Details About California’s Preliminary Notice Requirement.

The article addresses three primary details about the state’s preliminary notice rules:

1) What happens when a preliminary notice is sent too early or too late.  Essentially, what happens when a preliminary notice is fired off before starting to furnish the materials, or on the flip side, after the work had already been in progress for 20 days.  Does California follow the Ohio rule that early notices are invalid (no, they don’t).  Can a preliminary notice sent too late still have some effect (yes, they can)?

2) Why it’s important to keep good proof that your preliminary notice was sent…and delivered.

3) Whether additional preliminary notices are required each and every time there is a contract amendment or change order. We wrote in more detail about this particular question on our blog’s FAQs section, here: Is A Second California Preliminary Notice Required If A Change Order Increases Contract Price? (no).

Written by Scott Wolfe Jr See original article at California Preliminary Notices: Devil Is In The Details Originally posted on the LIEN