“Perfection is in the eye of the lien holder.”
~a construction industry participant once said, probably
The documents surrounding construction payment – and construction payment disputes – pay-apps, notices, waivers, liens, and more, must meet complicated and complex requirements and deadlines. Navigating this complexity can be even more work when there are multiple parts to a single document. When you add the issue of legal terminology (it’s okay – you can call it “legal mumbo jumbo”), it can be a headache the some construction participants don’t even want to deal with. But, they slog through anyway, as best they can, because they know that they need to – it’s just that important. When it comes to mechanics liens, there are a few terms that can cause confusion.
Since a mechanics lien is (get ready for some of that legal mumbo jumbo we were just telling you about!) an involuntary security interest in real property, the related terminology follows the general terms related to security interests in general. Some of these terms are attach(ment), perfect(ion), and enforce(ment). These legal terms all have specific meanings and are very important in determining things like the liens priority, or even its validity.
The date of attachment is generally used to determine the lien’s priority in the event there are competing claims. For mechanics liens, the date of attachment generally relates back to the start of the project as a whole, so all mechanics liens are of equal priority.
Perfection is something different, and in this post we will take a look at what it means to “perfect” a lien.
“Perfecting” a Lien – What Does That Mean?
Liens generally attach to the property upon the initiation of work (through a bit of legal fiction), but in order to actually encumber the property, the lien must be perfected. And the way to “perfect” a mechanics lien is the filing process. To put it another way: a mechanics lien is perfected by recording the lien in the appropriate recorder’s or clerk’s office (and serving the lien on the interested parties when required).
“All of my liens are perfect!”
~the proud lien mother said about her lien children
Many construction participants get confused by the terminology and think that the “perfection” of a mechanics lien is a foreclosure lawsuit. That, however, is a different step in the process – the enforcement of the lien. The perfection is merely the appropriate recording of the document.
Security instruments, whether UCC liens, mechanics liens, or something else, all must go through the steps noted above to complete their “lifecycle” – (1) attach, (2) perfect, and (3) enforce.
In terms of the mechanics lien claimant’s actions, attachment is automatic based on the work performed, perfection is the recording (which requires action), and enforcement is initiating an enforcement proceeding prior to the expiration of the deadline to do so (but which may not be required).
So, if anybody wonders what needs to be done to “perfect” a lien claim – or if their particular lien claim has been perfected, the real question that they are trying to ask (in plain English) is, ‘whether the lien was recorded and served appropriately and according the the statutory requirements.’