8 minute read
Mechanic’s Liens — Little Mistakes, Big Problems
LEGAL MATTERS
Jeffrey W. King Legal Counsel for the WFCA Jeffrey King has more than 35 years’ experience in complex litigation with a focus on contracts, employment, construction, antitrust, intellectual property and health care. He serves as legal counsel for WFCA and other trade associations, and is a LEED Accredited Professional. For more information, contact him at (561) 278-0035 or jeffw@jkingesq.com.
Mechanic’s Liens— Little Mistakes, Big Problems.
Almost every floor covering retailer, installer, or commercial contractor has run into problems with getting paid. If the retailer, installer, or contractor are subcontractors on the project, they cannot sue the property owner directly for the money because their contract is with the general contractor, not the owner. Mechanic’s liens provide a powerful tool to get payment for their work and products by allowing a lien to be placed on the property. The problem is that there are strict rules on how and when a mechanic’s lien can be filed.
STRICT ENFORCEMENT
A mechanic’s lien is a legal claim against a property for labor and materials provided for improvements to the property. Since mechanic’s liens impact the title to the property, the courts have consistently limited mechanic’s liens and often will invalid a lien for any discrepancy. A recent case in California illustrates how easy it is to lose the rights to a mechanic’s lien. In Precision Framing Systems Inc., v. Henry LuzuriagaI, 39 Cal.App.5th 457 (2019), a framing subcontractor was hired to provide and install trusses for a veterinary hospital. The subcontractor hired another company to design and fabricate the trusses to be installed. The design was approved by the building’s architect. Once installed, the general contractor inspected the work and found the subcontractor’s “work was complete and fully in compliance with the plans and specifications.” The framing company, however, never received full payment, and it filed a mechanic’s lien for the amount due. An issue was raised regarding the trusses when the city inspector issued a correction notice that required some minor repairs. The framing company disputed that it or its subcontractor who designed and fabricated the trusses caused the issues. Nonetheless, the framing company and its subcontractor made the minor corrections that took only two to three hours to complete.
The framing company sued to enforce its mechanic’s lien for the unpaid amount of its contract. The court ruled the lien was invalid. California law required that the lien be filed the earlier of ‘[n]inety days after completion of the work of improvement,” or [t]hirty days after the “the owner records a notice of completion or cessation.” Cal. Civil Code § 8414. The court found that the framing company filed its mechanic’s lien before completion of the work since it voluntarily made the corrections after filing the liens. A new mechanic’s lien could not be filed because more than 90 days had passed since the repairs were made.
The California courts are not alone in strictly enforcing the requirements for mechanic’s liens. For example, a Court of Appeals in Kansas refused to enforce a mechanic’s lien because the contractor failed to verify that the contractor’s address
on the attached bills and invoices was correct. Buchanan v. Overley, 178 P.3d 53 (Kan. App. 2008). Similarly, a court in Massachusetts dissolved a mechanic’s lien because the law required a “written contract” and the written proposal between a contractor and a property owner was never signed. Petrucelli Construction Co., Inc. v. Hirain Barrios (NO. 10-ADMS-10031)( Feb 15, 2011).
SUGGESTED PRECAUTIONS
The rights under mechanic’s liens are established by state laws. As a result, the specific requirements of a mechanic’s lien vary from state-to-state. For example, some states require a notice of the lien be filed when a project begins, while others prohibit the filing of a notice until the job is completed. To protect themselves, flooring retailers, installers, and contractors need to know what is required to file a mechanic’s lien. If a business works across state lines, it will need to know the local laws and regulations in each state where it works. There are several precautions to take based on the most common mistakes that the courts have found to invalidate mechanic’s liens.
Pre-Notice
One of the benefits of mechanic’s liens is that a flooring retailer, installer, or contractor can be a subcontractor and does not have to contract directly with the property owner in order to file the
lien. A subcontractor can file a mechanic’s lien even if the property owner has paid the general contractor, who failed to pay the subs. To ensure the property owner is aware of the non-payment, some states require a preliminary notice of the intent to file a mechanic’s lien be provided to the owner and general contractor before filing the lien. In some states, this notice must be filed at the start of the project. In others, the notice cannot be filed until after an invoice is not paid. The failure to provide this notice to the owner may defeat the mechanic’s lien claim.
In Florida, for example, subcontractors must file a Notice to Owner (“NTO”) within 45 days of after beginning to work on a project. The NTO is not a lien, but a prerequisite to filing a mechanic’s lien. To start the process of collecting on an unpaid amount, the subcontractor has 90 days from finishing work to file a mechanic’s lien.
Notify the Proper Parties.
States also vary on who is to get notice. All the statutes require the property owner to be notified, but may also include the general contractor and others. Flooring retailers, installers, and contractors should be aware of both who the notice should go to and the deadlines for filing the notice to avoid losing their rights just because notice was sent too early, too late, or not to the right people. When this deadline passes, the right to file a mechanics lien is lost.
Make Sure You Can File the Lien.
Many states allow only licensed professionals to file mechanic’s liens. Some states do not even allow unlicensed contractors to pursue actions for non-payment. Licensing requirements vary from state-to-state and can even vary from county-to-county within a state. Before starting any new job, the retailer, installer, or contractor needs to ensure that it complies with state licensing guidelines to protect its rights. This may be as simple as hiring a local licensed subcontractor to oversee the job.
Always Check the Deadlines to File.
Many states require mechanic liens to be filed within a fairly tight timeline. As the decision in California described earlier indicates, filing too soon can void the lien, and missing the deadline to file can invalidate the lien. Also, recognize in some states the lien must be filed in a certain amount of time when the company completed the work or when a Notice of Completion is filed. These states often shorten the time to file if a Notice of Completion is filed. For example, the time to file a mechanic’s lien in Nevada is the shorter of 90 days after completing the work or 40 days after a Notice of Completion is filed.
Check the Filing and Check It Again. State laws specify what must be included in any preliminary notice and in the mechanic’s liens. Some states require specific language to be included. Some laws require bold typeface in a specified size for certain items. All states require the lien to include the legal property description (block, lot, or parcel numbers, full metes and bounds, references to recorded legal documents, and the municipal address) and not just the street address. It is surprising how often an address on a building does not match the city or state records. There may also be different notice requirements if the flooring retailer, installer, or contractor is the general contractor than if they are a subcontractor.
A simple mistake or failure to follow the specified language can completely invalidate the entire lien claim. For example, naming the general contractor without the complete corporate name has invalidated a lien. Similarly, putting information on a form in the wrong place, using a nickname instead of legal name (William not Bill), or failing to use a business name can void the lien.
Do Not Let the Lien Expire.
A mechanic’s lien does not last forever. The length of time a lien lasts varies from state-to-state. Liens generally expire between six months to several years after they are filed. While some states allow mechanic’s liens to be extended (e.g. Alaska, California, Florida, Idaho, New York, and Oregon), most states do not. A lawsuit to enforce the lien must be filed before the lien expires. Once expired, a new lien generally cannot be filed absent new work being performed or new materials being supplied.
CONCLUSION
Given the importance of mechanic’s liens to the floor covering contractor and dealer, it is essential that the proper forms be filed within the deadlines to effectuate the liens. It is advisable for each contractor and dealer to consult with competent legal counsel to ensure that their liens comply with local requirements. A simple mistake can result in invalidating an entire claim. ❚
The information contained in this article is abridged from legislation, court decisions, and administrative rulings, should not be construed as legal advice or opinion and is not a substitute for the advice of counsel. The length of time a lien lasts varies from state-to-state. Liens generally expire between six months to several years after they are filed. While some states allow mechanic’s liens to be extended (e.g. Alaska, California, Florida, Idaho, New York, and Oregon), most states do not.
