In the past, including today, we’ve written a number of articles about different “Scenarios” in the construction industry, analyzing when those particular situations do and do not qualify for a mechanics lien claim. However, we’ve never addressed a pretty common scenario. What happens if some of your work qualifies for a mechanics lien claim, and other parts of the work does not?
How can this happen?
Well, let’s think about a scenario addressed this morning, regarding outdoor decor. What if your company was hired to completely renovate a home’s backyard, including the construction of a new deck, an above-ground swimming pool, and some outdoor decor (water basins, fountains, etc.). You’re company isn’t paid, and it’s time to file a mechanics lien. You’re owed a total of $15,000. How much is your lien claim?
In all likelihood, you may not be able to file a mechanics lien for the entire $15,000, because you may not have lien rights on the entire amount.
If the outdoor decor was not attached to the property, you must exclude this from your lien claim. If the above-ground swimming pool isn’t an “improvement” as defined by the particular state’s mechanics lien laws, you may not be able to file a lien claim for that either. Coming up with the value of your mechanics lien claim, as you can see, can become a very complicated affair.
Just getting frustrated and firing off a mechanics lien for the entire amount may be the easy and tempting choice…but it may be a fatal one for your entire mechanics lien claim. If you file a mechanics lien claim for the full amount, and you don’t have lien rights for the full amount, your mechanics lien claim may be considered frivolous or exaggerated, which spells bad news.
The Good News: Just because some of your work is not subject to a mechanics lien claim doesn’t mean all of your work suffers that fate. You can segregate the lienable work from the non-lienable work, and file a mechanics lien for the portion of work so entitled.
The Bad News: Figuring out what work is lienable and what isn’t, and then segregating the work itself into dollar amounts is tough and requires discipline to not exaggerate your claim.