One question that many people have regarding mechanics’ liens is what to do if they receive only a partial payment. As always with mechanics’ liens, the answer can vary. It may be easier to first look at some things not to do.
It is easy to think, if you have a valid lien securing payment of $X and you receive a partial payment that brings down the balance owed to $Y, that you should modify your lien to show $Y as the amount owed. This is dangerous. In many circumstances, a modified lien is given a new filing date. If the date on which you modified the lien is not within the period of time in which you would have been allowed to file the lien originally, you can invalidate your lien. In effect, by modifying the lien after the applicable time period, you may have changed your lien from having a valid filing date (and securing your claim) to being filed late and being worthless.
Another very dangerous decision would be to release the lien as a whole. It is easy to see the danger here, you are voluntarily giving up the security your lien provides for only part of the money that you are owed.
So, what should you do? There are two basic options. The first would be to do nothing. While this is the easiest and safest option, if might cause some friction with the party who gave you the partial payment. The second option is to file a partial release of lien. Partial payment = partial release, seems easy. Unfortunately, however, partial releases are not allowed in some states. In this circumstance, there is nothing you can do. Just keep accepting partial payments, and release the entire lien when the debt has been fully paid. If you do file a partial release of the lien, it is prudent to take care to make sure not only that the release clearly states that is only a “Partial Release”, but also that it is not a lien modification. This can save from troubles down the road, and keep your full payment secured by the property.
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