The following question pops up on construction projects all the time: “Can I file a lien even though I don’t have a written contract?”
And, as with most of the questions we get about lien rights, the answer is: it depends. Verbal agreements are common in the construction industry, but finding answers on how lien rights apply to contracts that are not written and signed can be a challenge. We’ve collected the relevant information from all 50 states’ lien statutes and compiled it here to make this question easier to answer.
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Different States Have Different Contract Requirements
Lien laws vary widely from one state to the next, so it’s necessary to understand your state’s lien laws in order to secure lien rights. When it comes to bestowing lien rights, some states strictly demand that lien claimants have a signed contract, while others are more flexible and allot lien rights more generally. States typically fall into one of the following four categories when it comes to improvement contracts and lien rights:
- States where written contracts are explicitly required to secure lien rights
- States where written contracts are not required to secure lien rights
- States with rules on contracts based on the amount or type of work
- States that don’t explicitly specify types of acceptable contracts
The maps below provide a general guide as to whether a contract type affects lien rights for contractors, suppliers, and other construction parties.
Simple Construction Contract — Free Template Download
Our staff attorneys here at zlien have created a simple construction contract that should be enough for you to use on your more straightforward jobs. There’s no other way to say it — a written contract signed by both parties is always better than a verbal contract or a simple handshake deal. Other important items such as change orders should be in writing, too
Last but not least, not all contracts have to be overly complex — sometimes, a simple, straightforward contract like our template here is enough to do the trick.
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States Where Lien Law Explicitly Requires a Written Contract
In these states, a written contract between the party providing work and the hiring party is necessary in order to secure lien rights. Contractors, suppliers, and other parties can only claim a mechanics lien for funds mentioned in written contracts. It’s not only important but vital to get a written contract to secure lien rights and protect from nonpayment in these states:
Want to learn more about the potential hazards of oral contracts? Read “Oral Contracts Can Compound Your Problems.”
The following states’ liens statutes generally permit construction parties to secure lien rights even if they don’t have a written contract. These statutes typically use language like “for the specific contract or agreed upon change” (New Mexico) and “contract means an agreement that provides for all or part of a work or improvement” (California) to describe contracts, and do not explicitly require that contracts must be written.
These states typically permit parties with verbal, oral, or implied contracts to claim lien rights, but to understand the specific rules in your state, click on your state in the lists below to view the lien statute in full. Even though these states may permit construction parties to secure lien rights and claim a mechanics lien even without a written contract, it is generally best practice to have a signed written contract for work provided.
Colorado and Indiana have contract rules that don’t easily fall into ‘written contract required’ or ‘written contract not required.’ Contract requirements in these states have more to do with the type of work being provided or the type of project than with the form of the contract.
Colorado’s lien statute is fairly straightforward. If the amount to be paid exceeds $500, the contract must be in writing in order to claim a mechanics lien.
If the property is owned by a public utility, municipality, joint agency, rural electric membership corporation, rural telephone cooperative corporation, or not-for-profit utility, a written contract is necessary to secure lien rights. The contract also has to be filed and recorded in the recorder’s office within five days of the execution of the contract.
The following states’ lien statutes don’t specify whether or not contracts must be written in order for a contractor, supplier, or another party that furnishes labor or materials on a project to secure lien rights. Oral contracts are typically valid so long as they adhere to the state’s rules on contracts, but companies should consult with a lawyer if they questions about a specific situation and don’t have a clearly defined written contract.
It’s always a good idea to get a written contract to ensure a smooth payment process and to minimize risk, but in many states, oral agreements – even implied – are sufficient to secure lien rights. This article gives a general overview of requirements as a jumping off point for those curious about whether or not it is necessary to have a written contract in order to secure lien rights. To learn more, visit zlien.com/resources.
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