Previously, we began looking at the role mechanic’s liens can play in allowing contractors to secure payment for work performed on real property under a valid contract with the owner of real property. The most important issue for any contractor or subcontractor who remains unpaid for work performed on a property is the relief available to them when the lien is enforced.
A valid lien, when enforced, allows the lienholder to secure payment for all debts owed in connection with the work completed on the property. This includes not only the principle amount owed for the work but also interest, provided interest obligations are specified in a written contract. Certain types of damages are not awarded to lienholders, such as lost profits and other damages resulting from the failure to pay for the work performed. Neither are attorneys’ fees awarded on mechanic’s liens.
In order to file a valid lien, there are several key steps that must be taken. The first is the provision of notice. In the first place, all potential lien claimants are required to provide notice to the lien agent associated with the real property upon which the work is being performed. Specific information must be provided in the notice and certain conditions must be met.
The next step in the process of filing a lien is the perfection of a claim of lien, which occurs when the lien is filed in a timely manner and the owner–or the contractor, if the lien is filed by a subcontractor–is served with a copy of the claim of lien. This step occurs after the owner has refused to pay for work performed.
After a lien is perfected, a lawsuit may be filed. Working with a skilled attorney in the process is important to meet the technical requirements in litigation, such as those pertaining to the timing of a filing and jurisdiction selection, but also to ensure that a party’s rights–whether to payment or to have the lien discharged–are protected. We’ll say more about this in a future post.