So, you fulfilled all of your notice requirements and you filed your mechanics lien on time. The other party still hasn’t made payment, and you begin to wonder…now what?
Why Mechanics Liens Work
First, before discussing what happens after the lien is filed, let me first address why mechanics liens are effective ways to collect on non-paying projects.
This is an important point when discussing what happens after a mechanics lien is filed because it touches on why mechanics liens sometimes prompt payment without any further action after the filing itself.
Mechanics Liens are effective for the following reasons:
– Without a mechanics lien, you can only sue the party you contracted with. With a lien, you can sue the property owner, those up the contracting chain from you, and the surety bonding the project.
– A mechanics lien can prevent a property from being sold, transferred or refinanced
– Without a mechanics lien, you have no security when you file suit on your breach of contract claim. With a lien, your claim has the property has security.
This is a perfect storm of aggravation to the project and the parties working on the project, that frequently results in getting you paid without any action beyond filing the lien. See how it worked on the MGM Project in Vegas here.
What Happens Next?
But what happens if your mechanics lien does not produce immediate payment? See article on this topic here.
Most states require the lien be “enforced” or “foreclosed.” This typically means that you bring a lawsuit against the person you contracted with and/or the other relevant parties (property owner, prime contractor, surety, etc.). In most circumstances, the lien stays on the books while your action is pending, and if you win…you have the security of the property to ensure you get paid.
It is very important to recognize that you only have so long to enforce or foreclose on your lien. If you fail to do this within the specified time frame…your mechanics lien will expire completly.
The time you have to enforce or foreclose on a mechanics lien varies depending on the state where the project is located. We have Construction Lien Law Summaries, and specifically the time period to enforce mechanics liens from each state, available on our State-By-State Lien Law Summaries and Forms Page.
And don’t forget about Zlien’s Lien Pilot, which calculates your project’s deadlines for you (including your deadline to foreclose / enforce a mechanics lien).
What Happens When My Lien Expires?
Well, this is a pretty sensitive subject. You can always bring your lawsuit against the party in your contract (if you are within the statute of limitations for your state).
But with respect to the mechanic lien’s viability, Kelly Davis has a great article published on her blog on this issue: Didn’t Foreclose on your Mechanics Lien? What Should You Do Now?
This article was originally posted on Express Lien’s topic-specific Construction Lien Blog.
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