It is often that someone contacts us suspecting that they don’t have mechanics lien rights, and they are wondering: should I file the mechanics lien anyway? There is a lot that goes into answering this question. Since Zlien is not a law firm, it can’t and doesn’t give legal advice, and so we always inform the client that in deciding an issue like this, they are on their own.
We’ve danced around the issue before on this blog, particularly in the recent post “Can I File A Mechanics Lien If I Didn’t Send Preliminary Notice,” and in posts like “Proving A Mechanics Lien Is Exaggerated Is A Tough Case To Prove.” Here, though, we’ll tackle the question head-on.
Don’t Be So Sure You’re Without Mechanics Lien Rights
When I’m wearing my lawyer hat over at Wolfe Law Group and this issue comes up, the first thing I think about is whether the client is wrong about its rights to file a lien. Mechanics lien claims are funny. State lien statutes contain so many nuances they overwhelm any reader.
Recently someone contacted me about filing a mechanics lien in California for materials that were supplied to a project, but never used by the parties. As any committed reader of this blog knows this is a big no-no in the mechanics lien world. The general rule everywhere is that a mechanics lien cannot be filed for materials that are not incorporated into the immovable.
This client, however, had furnished “specially fabricated materials.” There may be an exception to the general rule for this type of furnishing. The thing is that mechanics lien laws are so convoluted that there is almost always an exception that applies, or at least can be argued to apply. There are certainly situations when your mechanics lien rights are black and white, but the mechanics lien laws contain a whole lot of gray.
The first thing to consider when wondering if you should just file the mechanics lien regardless of your lien rights is that you may actually have lien rights. Wouldn’t you kick yourself in the backend if you didn’t file the lien and then found out you had the rights all along?
Your Exposure Risk For Filing An Invalid Claim Can Be Very, Very Low
If you file an invalid lien and then spend thousands and thousands of dollars defending it, your exposure risk can be high. The lien may cause damages to the owner for clouding the title and you may be required to reimburse the owner’s attorney fees.
But what if you were willing to release your mechanics lien if someone demanded it?
A lot of invalid mechanics lien claims get paid every day. They get paid either because: (i) the other parties don’t want to spend the time and money to fight the claim; and (ii) The other parties don’t realize the lien is invalid. As such, so long as your legal exposure is low, it is probably worth the risk to file a mechanics lien that you suspect is invalid.
If you go into the situation with a level head, your risk and exposure is very low.
The first thing that happens when an invalid lien is challenged is that the lien claimant will receive a letter from the owner, prime contractor or an attorney explaining that the claim is invalid and demanding the claim be discharged (remember, just because a letter says your claim is invalid doesn’t make it so). If you receive this letter and release the mechanics lien, you’ll probably find yourself in a “no harm, no foul situation.” After all, what actual damage did you cause? But by filing the lien, you bought yourself the chance that the lien claim gets paid because one of the two reasons above-enumerated.
Just because your changes are low that you’ll have legal exposure doesn’t mean that you are bulletproof. There are scenarios where you could find yourself with a bit of exposure. If, for example, your lien actually does cause damage within the short time that it is valid, you could be exposed and liable for those damages. In many states, the owner or general contractor could also come after you for the attorney fees is spent in having the lien reviewed and the demand letter drafted.
These scenarios are uncommon, however. The fact is that an invalid mechanics lien may get you paid, and if it doesn’t get you paid, you may have gotten a free spin at the remedy.