mechanics’ liens
What is a Mechanic’s Lien?
A mechanic’s lien is a statutory lien filed by a contractor, subcontractor, supplier or other furnisher of labor and/or materials against a property where labor has been performed, materials delivered, etc. that, when filed correctly, can provide an unpaid construction party with security interest in the property in order to secure payment.
What to know
Anyone wishing to file a valid mechanic’s lien must adhere to the following guidelines:
· A Preliminary Notice of Lien must be filed on the State Construction Registry (SCR), a standardized, statewide system for filing and managing the pre-lien process, within 20 days from commencement of work or filing of the Notice of Commencement, or 10 days from the filing of the Notice of Completion. A Preliminary Notice MUST be filed before a lien is recorded. If not filed, lien rights are lost.
· After the Preliminary Notice is filed, a claimant has 90 days from the date of final completion of the original contract to file a written notice with the court to hold and claim a lien with the county recorder. Additionally, within 30 days after filing the notice of lien, the claimant must deliver or mail a copy of the notice of lien to the reported or recorded property owner. If all requirements are met, the lien will “relate back to and take effect as of the time of the commencement of the work and shall have priority over any lien, mortgage, or other encumbrance which may have attached subsequently to the time when the project was commenced.”
· In order to enforce the lien, the claimant must file a court action within 180 days from the filing date of the notice of claim. The claimant must also file a notice of lis pendens within the same period of time.
· If the lien is placed on a residential project, the claimant must, when serving the owner with the complaint, include instructions to the owner relating to the owner’s rights under the Residence Lien Restriction and Lien Recovery Fund Act as well as an affidavit specifying how the owner may exercise his or her rights under the Act. Failure to provide these things to the owner will bar the claimant from enforcing the lien.
What is the Residence Lien Restriction and Lien Recovery Fund Act?
The Act has two main components. First, it provides homeowners with limited protections from mechanic’s liens arising as a result of construction of/on their residence. If the homeowner meets certain conditions, the claimant is barred from maintaining a lien on the residence or recovering a judgment in civil action against the owner.
Second, the Act creates the Residence Lien Recovery Fund, against which a potential claimant may recover payment for qualified services as well as certain attorney’s fees and other costs.
How are Mechanic’s Liens handled?
We do our best as a title and escrow company to ensure that all liens are handled very carefully, in a manner which brings about the least likelihood of a cloud on title, such as a mechanic’s lien being perfected. When handling a transaction in which construction is happening or has recently taken place, we perform a search of the State Construction Registry, as well as of county and other records. By doing so we are able to determine any potential liens or preliminary notices that could lead to a claim. Once we have identified all parties that may have a right to lien, we contact them by any means necessary to learn of the status of payment. We use a specific waiver for SCR filings, with which the party can disclose the amount owed, if any.
We WILL NOT proceed with closing (recording/funding) if we have not received a waiver from any and all parties identified to have a right to lien. Furthermore, we will not close without taking all steps necessary to ensure that all balances have either been paid or have had sufficient funds within our escrow trust account set aside to pay said balances in full. We take these precautions as a service to our clients, further guaranteeing that the title to their property remains free and clear.