Tip of the Month
Mechanics’ Lien Q&A
As the real estate market slows down, trade
contractors in particular need to closely monitor their
accounts receivable. A good business practice is to
issue prompt invoices for “progress payments”. This
procedure will help provide a more consistent cash
flow as well as immediately uncover any homeowner
disputes or “over-budget” issues. Advance warning
offers you an opportunity to resolve disagreements
before the project is completed.
However, for delinquent accounts over 60 days,
you should consider placing a mechanics’ lien on the
property. This month, I would like to answer some
frequently asked questions:
1) What is a mechanics' lien?
A mechanics' lien is a right given
to contractors, subcontractors, licensed architects,
engineers, and supply houses to
secure payment for labor, material or services
rendered to improve a property.
2) How is a mechanics' lien
filed?
The right is enforced by recording
a lien with the town recorder's office of the
town where the land is situated and gives the lien
claimant the right to foreclose and sell the property.
In Connecticut, you must file a lien within 90 days
from the date of final completion of the original
contract. In New York, the claimant must file
within 120 days.
3) What may be
included
in calculating the amount of the lien?
- On-site services: the value
of the service rendered, labor performed, or
materials or equipment furnished or rented.
- Professional services: the value of
designs, plans, maps, specifications, drawings and
surveys.
4) What does the Notice of
Lien
require?
- Name of the owner
- Name of the person or entity who
hired the lien claimant
- First and last day of work or when
services were performed or when materials were
furnished
- Description of the property,
sufficient for identification (Lot/Block)
- Name and address
of the lien claimant
- Amount of the lien claim
- A notarized signature of the lien
claimant or claimant’s representative
Since a successful claimant may be entitled to be
reimbursed for attorney fees and costs, it is wise to
consult a knowledgeable construction attorney
before payment issues become a problem and lien
rights are lost. It is crucial, however, not to wait
too long or your rights may expire.
