Mechanics liens can be canceled or released by the lien claimant. The release is important to consider once payment has been received, as a tool to mitigate rough business relations with the customers, and to ensure your own business integrity. Releasing a lien that has been paid in full is the fair thing to do, and it may be specifically required by statute. Full payment might not be the only reason why you would want to release a lien, however, anything from wanting to avoid a lawsuit, to wanting to keep a certain client content can trigger a need to release a lien.
Whatever your reason to release a lien might be, it is imperative to file it correctly. Keep your facts straight about these common lien release myths.
Myth #1: Lien releases can’t be rejected by recorders
Many of the same mistakes that result in mechanics liens being rejected can also result in an un-recorded lien release Incorrect. There are dozens of reasons why a mechanics lien might get rejected by the county recorder (in fact, there are probably more reasons for rejections than there are different county recorders themselves). In fact, many of the same mistakes that result in mechanics liens being rejected can also result in an un-recorded lien release. Lien releases can be sent back unrecorded for many reasons, all of which are frustrating, and may result in delay in payment.
One of the most common mistakes that can lead to a lien release’s rejection is providing incorrect or incomplete reference information to the original lien. It is imperative to include the instrument or case number of the originally filed lien, as well as the book and page if there is one, and a reference to the date the lien was filed. This information is usually obtainable from the lien itself, but it may be necessary to contact the recorder’s office if your lien copy doesn’t have the required reference information, or if the reference information is illegible. Some states, like New York, do not always include this information on the recorded lien, but may provide it on the receipt of payment.
Other common mistakes on lien releases include improper wording on your lien release, an incorrect lien claim amount listed, not providing the correct legal description or address of the real property that was liened, and not referencing the correct names and addresses of the claimant or defendant(s). As with any filing, it is imperative to follow the specific county’s recording requirements, including fees, margins, and any cover pages or preparation statements they might need.
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Myth #2: Lien releases erase the lien from existence
Incorrect. Canceling a mechanics lien does not erase the lien from existence as if it was never filed in the first place. While that may be the legal effect, the physical lien is likely still to be found in the county property records. A released or canceled lien will no longer encumber the property and affect the property’s title, a record of it will still usually exist with the recorder. In fact, in many cases, the release is recorded on the original lien itself as a notation that the lien has been released/canceled, and that it is no longer has any legal effect on the property.
Myth #3: Lien releases must always be served
Generally Incorrect. Mechanics lien releases are generally not served on the property owner and/or other interested parties (general contractor, construction lender, etc.). Because the property owner and other interested parties generally are not formally served a copy of the release, it is up to the claimant to determine when, how, and if notice that the lien has been released is given, and to whom. Releasing a lien is often intertwined with the exchange or promise of payment, however, so it generally makes business sense to give some type of notice or proof of the lien’s release (or pending release).
Some property owners may demand an official copy stamped and certified directly by the county, or even the stamped original document itself for their own personal reasons, most state statutes do not require this type of notification. Generally, providing an electronic copy of the lien release to any party that would like proof of the release should be sufficient.
Myth #4: There’s a difference between a release and a cancellation
In Title But Not In Effect. While the difference between a release of lien and a lien cancellation is only a semantic difference, it is a semantic difference that can create recording problems depending on the specific language preferences of the particular state, or even county. States vary from calling this type of instrument a release, a satisfaction, or a cancellation – and if the “wrong” title is used, the document may be rejected.
Even though there is not a functional difference between calling a document a lien release or a lien cancellation, a difference in what a county wants to see and what is actually on the document can result in a rejection of the document for recording, and delay payment. A Satisfaction of a Mechanics Lien in Pennsylvania fulfills the same purpose as a Release of a Mechanics Lien in California, but flipping the titles could result in neither being properly recorded.