The lien is a powerful tool at your disposal to increase your ability to get paid.
As an encumbrance, or a hold on real property, it creates a cloud over the legal title preventing the sale or refinance of the property. When you place a lien on a piece of property that you have improved through your work, ownership can’t generally be transferred while you are owed payment. A lien usually constitutes a technical default on a mortgage, and that gets the attention of the mortgage company. A lien may also be considered a default on a prime construction contract.
A lien creates pressure to get you paid, but it’s important to recognize that filing a lien is just a starting point. You have to do a number of other things yourself.
To place a lien, serve a Notice to Owner no later than 45 calendar days from day your first work on project. Doing this much earlier is best.
Next, record the Claim of Lien no later than 90 days from your last day of work on the project. This must be signed, notarized, and physically brought to the clerk’s office – all of which can take time. Best practice is to get this process underway after no longer than 60 days have elapsed. Within one year of recording the Claim of Lien, you should file a lawsuit to foreclose on the property.
What actually happens after you record a lien?
Simply put: nothing. You have to make something happen. Your lien alone might cause the owner to want to pay you – maybe. However, the lien is merely a cloud over the property at this point, not a legal order to pay.
While the lien starts the process to getting paid, and it puts you closer to the front of the line, you must enforce your lien rights through a civil court action called “foreclosure.” Unless time is legally shortened, you must file a suit to foreclose no later than one year from the recording date of the lien. This is similar to any other court action in cost and time. The property owner could claim you did not deliver materials or work on time, and that’s why you haven’t been paid. You must deal with those issues in court.
So how do I get paid?
Those who get paid do not wait on or miss deadlines. You can actually record your lien right after you start work. The dates given are outside limits, and you don’t want to wait, especially in this economic climate.
Then, for 60 days after recording the lien, hassle your customer and owner for payment by phone, mail, and email. Visit your client and sit in their office, waiting to get paid. Your effort is important because it could possibly prompt payment and avoid court action.
After those 60 days, construction lawyer. Don’t wait unless you have a good business reason to do so.
My lien was “bonded off.” What does that mean?
It means you should celebrate! Your lien was on the property, subject to the foreclosure process and the hope that there’s equity in the property after prior mortgages are taken out. But now, bonded off, it has been attached to either a surety bond or cash held by the clerk. The bond amount is 150% of the Claim of Lien. You should be covered but prepare for a fight. They will assert defenses before paying you.
There’s a “Notice of Contest of Lien.” Now what?
This means you should file your lawsuit to foreclose immediately. File your action to foreclose the lien within 60 days of the Notice of Contest being received. If you don’t file by the 60th day, your lien will automatically be extinguished.
I received a 20-day summons. Is this a problem?
This also shortens your timeline and means you should file a lawsuit immediately. A process server delivers a 20-day summons. If your response or counterclaim for foreclosure is not filed within 20 days, the lien is extinguished.
There are no caveats to these rules; they are firm deadlines. Importantly, remember that filings alone will not result in payment. That can only come after meeting a series of statutory deadlines, pushing for payment, and then filing a court action.