Filing a mechanics lien is an effective way to get paid if confronted with a non-paying project, but that doesn’t mean you can just file the lien document and forget about it. Like anything else, follow-up is required.
Step 1: Send The Mechanics Lien To Everyone
This one is a no-brainer. In many cases, state law mandates that mechanics liens be served upon certain parties like the property owner or the general contractor. Of course, comply with these requirements, but also go a step further by sending copies of the mechanics lien to all potentially interested parties, including subcontractors, construction managers, property managers, lenders, and more.
The magic of the mechanics lien is that it gets multiple parties involved with your debt. Sending the lien claim along to these parties insures that is accomplished.
Once you start distributing the mechanics lien claim, give it a little time. You want to give the mail service a chance to deliver the lien, and then give each recipient some time to review the claim and to talk about it internally. By the way, if you filed your mechanics lien with Zlien, you can skip this step because our liens are mailed off to all interested parties on your project.
Step 2: Call The Person Most Likely To Pay, And Then Call The Property Owner
Once you’ve given the mechanics lien claim some type to get distributed to everyone on the project, you’ll want to followup with a call to some key parties.
The most important party here is the person who is most likely to pay you. Typically, this is the party that hired you to work on the project. While they may have been tough negotiators before, filing the mechanics lien probably shifted the leverage, and you may have some more wiggle room. Talk to them and see what their payment plans are post-lien.
If that conversation goes no-where, or if you just want to make sure the pressure stays on, give the property owner a call as well. While many folks in the construction world understand the mechanics lien instrument, property owners are sometimes perplexed. It’s a good idea to give the property owner a call. Explain to the owner that you’d rather not involved him or her, but if you don’t get payment from someone else on the project, you’ll be required to enforce your lien against the owner directly. This usually gets their attention.
Phone calls and emails are important and you should give them time, but if talks are dragging on for longer than 10-14 days without any payment commitments, you want to move onto the next step.
Step 3: Send Letter Warning of Foreclosure
If your phone calls or emails don’t elicit payment or a payment plan, it’s time to escalate the claim. Do this by sending a letter to the property owner, the prime contractor and any other interested parties warning that the mechanics lien will be foreclosed upon if you don’t receive payment. Send it certified mail.
Folks get intimidated sometimes when writing letters. You don’t have to be Mark Twain here, something simple like the following will work:
Dear Sir or Madam:
Having not received payment for the services furnished to your construction project located at _______________, our company filed a mechanics lien against the property. Attempts to collect this debt from relevant parties following this filing has thus far failed.
Please be advised that our company intends to proceed with foreclosure of this claim if payment is not arranged within the next seven (7) days. At the end of any such action to foreclosure, a judgment may be rendered against the property in the amount of our mechanics lien claim plus attorneys fees, costs and interest, and the property may be sold to satisfy our claim.
Download a template letter here: Demand on Mechanics Lien.
Mark 7 days on your calendar. Make another phone call or send another email if you think it’s worth it. If 7 days come and go and payment isn’t arranged, move onto Step 4.
Step 4: Escalate To Collections
Some people don’t like collection agencies, but that’s because they’ve worked with the wrong collection agencies. A quality collections partner can help your company collect debt instead of writing it off, and without incurring expensive attorney fees.
Why? Because a commercial collections agency can escalate the importance of your debt by reporting the company to credit bureaus, by acting as a third party neutral to negotiate the issues holding up payment, and by simply acting as an indication to the non-paying party that you’re willing to escalate the debt.
Send your account to commercial collections as the next step. Give this process between 20-45 days.
Step 5: File Foreclosure Lawsuit
Most mechanics lien claims get paid before a foreclosure action is ever required. However, there are those instances when none of the above measures work, and foreclosing on your lien claim is necessary.
While you may be unfamiliar with foreclosure lawsuits and the legal process in general, that’s not a reason to let your mechanics lien claim expire and to just write off this debt. The debt may have its challenges, but it is not dead. Just as the mechanics lien filing is effective at getting most companies paid, escalating a lien claim to a foreclosure action is successful at getting most of those types of debts paid.
To file a foreclosure action you’ll need to hire an attorney. In most cases, even if your claim value is very low, this is not something you can pursue in small claims court alone.
If you are collecting your debt through Zlien, Zlien’s collections program will find an attorney practicing in the area of the construction project to proceed with the lien foreclosure action. This is an extension of the collections program, so it won’t cost you any hourly attorney fees.