The ability to file a mechanics lien is one of the most powerful tools in the construction industry. A valid, enforceable mechanics lien can virtually guarantee that a construction company can get paid the money they’ve earned on a construction project.
While mechanics liens are generally available in all 50 states, the rules and requirements that determine how liens work vary on a state-to-state basis with no two states operating the exact same way. These varying requirements include determining which kinds of construction work are eligible for lien rights.
So, how do you know whether the construction work you perform qualifies for mechanics lien protection?
Does My Work Qualify for a Lien?
This question is one that we receive often at our Construction Legal Center and in the comments of our blog posts. On the surface, determining whether lien rights are available may seem like an easy task. Other times, making this determination can create headaches.
One of the best sources of information out there to help construction industry participants answer the, “does my work qualify for lien rights?” question is available on the RESOURCES section of the zlien website.
To visit the resources page, click on the link above, and after the page loads, select your state, and take a look at the “Lien and Notice FAQs.” The first question addressed for each state is “Who can file a mechanics lien?” – and that’s a great place for you to start.
In addition to the help that’s available to you on the zlien website, here are some questions to ask yourself that will help you determine if your work qualifies for mechanics lien protection.
Some Questions to Ask
What type of project is it?
But determining type goes beyond whether a project is public or private (or even a P3 project). Lien rights may also vary depending on whether a project is residential or commercial. Yet, even that determination may not be obvious – some states cut off “residential” projects based on the number of units. When it’s a condominium project, even more variables can come into play.
Did you give proper notice?
At zlien we recommend that preliminary notice be sent at the start of every project– communication makes everything run more smoothly. However, sending notice is often more than just a suggestion. The existence of lien rights is often dependent on whether notice requirements have been followed.
In many states some form of preliminary notice is required, and if that state’s notice requirements are not met, lien rights are either reduced or eliminated. A Notice of Intent to Lien may also be required, and we recommend sending these documents, too (regardless of the requirements).
Essential Notice Resource
What is your project tier?
When we talk about project tier, what we’re asking is,“How far are you removed from the owner?”
Those who directly contract with the owner – general or prime contractors – are considered first-tier. Generally, first-tier project participants will have lien rights, but what about their subcontractors and material suppliers?
The subs and suppliers who contract directly with the general contractor are considered second-tier participants on the project, and these companies also generally have mechanics lien rights. But for third-tier participants on down, lien rights vary greatly depending on the state.
Did your work on the project improve the property?
In virtually every state, lien statutes will look to see if the labor and/or materials went toward the improvement of the property. But just how much must the property be improved? Often, things like landscaping or maintenance work will not suffice for a qualifying mechanics lien.
A popular way to judge whether property has been improved is to look at the permanence of the work performed. This is not to say that every lien claimant must have their thumbprint on the project – a lot of work that goes into a job goes unseen. However, if work cannot be tied to a lasting improvement on the property, it becomes less clear whether or not lien rights will be available.
Were the materials you provided incorporated into the project?
Material suppliers’ lien rights often depend on whether the material supplied was actually used in the project. A supplier may be under contract for some greater amount, but often, only the materials that actually made their way into the improvement will serve as a basis for lien rights. Keep in mind- this is not necessarily true for every state.
It makes sense why suppliers are typically not able to lien the full amount of their contract if all of the materials contracted for don’t make their way into the project. In construction, many materials are easily reused or repurposed from project to project. However, when specially fabricated materials are in play, all bets are off.
Talk to Us
No one said this stuff was easy. The fact of the matter is, as powerful as lien rights are, effectively managing those lien rights is one of the biggest challenges in the construction industry. But there are resources available to help. You can always visit the resources section of the zlien website (link above). And you can also talk to us.
If you’re having trouble getting paid on a project, or even if you’ve recently been burned, get in touch with us. We’re here to help you get paid.