Mechanics liens are the construction industry’s most powerful tool for payment, but sometimes, deciding whether to file a lien can be tricky. We recommend that all construction companies create a lien and notice policy to remove the guesswork and emotion from this decision. However, sometimes there will be variables that may not be included in a lien policy. An example of this is: Should you file a mechanics lien if you’re already headed to mediation? We’ll briefly dig into the question below.
Should You File a Lien (If You’re Already Headed to Mediation)
Know Your Deadlines
First thing’s first – mediation will not extend your lien deadline.
That should be the most important factor to consider when deciding whether to lien when a scheduled mediation is coming up. Lien laws are rigid, complicated, and often, unforgiving. But the good news is that agreeing to mediate typically doesn’t prohibit a lien claim. So if a lien deadline is looming, it would be wise to do whatever it takes to preserve your lien rights, even if it will upset the other party.
Filing Is an Opportunity to Create Leverage
Mediation creates a great opportunity to settle disputes without expensive litigation costs. But, at it’s core, a mediation is basically just a non-binding negotiation with a referee (well, mediator). Like any other negotiation, the side who is best prepared to argue their case will be put in the best position to succeed. The mediator will review the positions of both parties and leverage their positions against one other. Eventually, the hope is that this process will motivate both sides to settle the dispute in a manner that’s fair.
By filing a mechanics lien prior to the mediation, a claimant will have more firepower in the negotiation. Now, this is not to say you should file a bogus or frivolous lien for the sake of leverage. We’re pretty clear on our stance here – don’t file a fraudulent lien. But when payment is owed, and a lien claim is legitimate, there’s no reason not to use every tool at your disposal. Plus, if mediation is successful, the lien may be removed. By giving your adversary more motivation to settle, the fruits of your mediation efforts will quite likely improve.
Deciding between Collections, Arbitration, or Litigation can create headaches.
A Lien May Create Tension, Though
Mechanics liens are incredibly effective at prompting payments because they’re so powerful. They threaten the title of an owner, and an owner’s fear of losing their property creates tension. If mediation has been agreed to, it’s entirely possible that an owner will feel betrayed or misled. This could turn mediation into a fruitless shouting match, and this possibility should be taken into account when deciding whether to file a lien.
However, deciding not to file a lien solely to keep an owner happy is a dangerous proposition. If the ability to file a lien is lost, and then the mediation is unsuccessful, the only route left may be to litigate the dispute. As we’ve written before, going to court is more expensive and can be riskier than mechanics liens or arbitration. Mechanics lien laws are there for a reason, so don’t be afraid to use them.