Because a lien claim is an asset, most states allow you to assign the claim to another person or entity. In other words: You can transfer or sell your right to a mechanics lien claim from one party (the assignor) to another party (the assignee). In that case, the party who receives the right to the claim has the right to collect on the lien.
You may know why you should file a mechanics lien, but you should also consider whether your state provides the right to assign a mechanics lien—and what to consider if “assignment of lien” is on your radar.
Are mechanics lien rights always assignable?
Lien rights are not always assignable, and it typically comes down to state law to determine if you’re able to assign your mechanics lien rights.
Since a lien claim is an asset, most states will allow it to be assigned. There are, however, a few states that do not authorize the assignment of a mechanics lien claim.
If you are not allowed to assign your mechanics lien claim and you try to do so, you may cause some serious problems to the claim. Not only may your claim face invalidation, but you may also get yourself into legal trouble with the other party for assigning a claim you had no right to assign.
Why would you assign a mechanics lien claim?
Choosing to assign your mechanics lien rights means you’ll enter into a negotiation. The buyer will offer you some amount of money (which will be less than the full value of the claim) to obtain the full value of your rights. You’ll need to evaluate the offer and decide if the amount is high enough for you to walk away from the claim.
Since a mechanics lien claim requires foreclosure and legal effort to collect, usually liens are assigned for a fraction of their worth. If you want to sell your lien claims, be prepared to take a significant discount. The benefit, of course, is that you will be paid now—without a potentially lengthy legal fight.
Follow proper procedure when assigning a mechanics lien
While most states allow claim assignment, there are usually some procedures that must be followed to effect the assignment.
Vincent Pallaci of the New York Mechanic’s Construction Payment Blog just posted an article about assignment requirement in New York: “Assigning a mechanic’s lien in New York? Make sure you record your assignment.”
This article does a great job of highlighting on very important step that assignors and assignees must take when executing an assignment: Recording the assignment.
This is an example of just one procedure in one state. If you decide to assign your mechanics lien claim (or to buy a mechanics lien claim) make sure you consult with a construction attorney to do it right.