Preliminary Notices and Mechanics Liens: A Contractors Right Can Be A Homeowner’s Plight
Every homeowner who embarks on a home remodeling or building project looks forward to their dream home beginning to take shape. They anticipate a flurry of activity at the beginning, first with demolition followed by the arrival of materials and subcontractors ready to work.
Shortly thereafter, certified letters requiring their signature arrive in the mail from suppliers and subcontractors. When they anxiously open the letters to read the words “Preliminary Notice” stating that someone is asserting lien rights against their property – they panic! But they shouldn’t – at least not at this point. The homeowner is simply being alerted to a commonly used legal instrument in construction that ensures payment for services, labor and materials provided for a home remodeling or building project.
The purpose of a Preliminary Notice, also know as “Right To Lien”, “Pre-Lien” or “20 days Notice”, is to notify the owner of the property that if the party providing the Preliminary Notice is not paid, then that party will have the right to record a Mechanics Lien against the owner’s property. The time frame within which the notices must be sent to the property owner varies from state to state. Some must be sent to the homeowner within 20 days the sub contractor begins work on the project or when a supplier delivers materials. Other States have less than 20 days and still others have up to 90 or 120 days.
As a general rule, every subcontractor and materials supplier furnishing labor, services, equipment or materials to a construction project without a direct contract with the owner of the project, must give a written Preliminary Notice to the property owner if they want to retain their lien rights. Accuracy is essential for a valid preliminary notice. Notices should be served by certified or registered mail or if delivered in person, proper documentation and signatures must accompany the preliminary notice. Finally, receiving a preliminary notice does not mean someone is going to file a Mechanics Lien against you. It simply ensures their right to lien you if the contractor doesn’t pay them.
It is the responsibility of any homeowner who remodels or builds a home to educate him or her self about the construction laws in their state. Understanding lien laws and pre-lien rights and learning how to protect yourself from having a Mechanic’s Lien filed against your property are key to having greater control over the project and your money. Obtaining Lien Releases and Waivers after each payment to the contractor is something homeowners need to educate themselves about. Once you understand this, you’ll avoid the surprise and justified anger that the money given to the contractor to pay the subs and suppliers never transpired, despite the fact that it is his/her responsibility to do so. A homeowner typically finds this out when they get slapped with a Mechanics Lien against their property for non-payment from a supplier or sub contractor.
So just what is a Mechanics Lien and what should a homeowner to do at this point?
A Mechanics’ Lien is a legal claim to real property until a debt has been paid. If you employ a trades person or contractor to work on your home and a dispute arises wherein you refuse to pay, the worker has a right to file a lien thus making the property responsible for payment. Mechanics’ Liens must be recorded with the County recorder where the property is located. Liens must be enforced by a lawsuit to foreclose on the property within a specific time frame (varies from state to state -usually 90 up to 180 days) of the date of recording or they automatically become null, void and unenforceable. If this time has elapsed and the contractor has not filed a lawsuit within the time period allowed, then demand that he execute a release of lien in writing. If he refuses to cooperate then the homeowner can petition the courts for a decree to release the lien. This usually requires hiring an attorney, as the process can be somewhat complicated.
It’s important to note that unethical contractors file the majority of liens and usually the liens become null and void based on the fact that the burden of proof lies with them. It’s costly, requires legal representation, proper documentation but more importantly they have to be 100% correct to win their case. Moreover, these contractors never intend to perfect the lien but instead use it as a tactic to either scare the homeowner into paying them more money, or to get back at the homeowner who has filed a legitimate complaint against the contractor. Ethical contractors use it only as a last resort and know they have a legitimate case.
Good contractors strive to maintain excellent customer relationships by working with their clients to resolve problems, perform quality work, always pay their subs, and conduct themselves professionally with the goal of building a successful business. Finding an ethical contractor takes some work on the part of the homeowner but by doing so ensures having less problems and a more positive outcome for both parties.
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