Who Files Preliminary Liens?

nadonailer

I feel awkward filing a preliminary lien on a new customer, but after my last nightmare job (on which I am getting stiffed for 20-30k) I am filing a prelimary lien now just to be able to have claim on any work. I am wondering about having them printed on the back of my contract so they are automatically part of the job, but I don't know if this is legal. So what'd'ya guys do?
Bruce

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skyhook

Pre Lien is a great idea. Write it on the contract and charge the customer a nominal filing fee up front. My friend & Oregon Landscape Architect said it's good as gold.

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Ed the Roofer

In Illinois, it is called an "Intent To Lien" and does not have to be filed, but proof of service to the HO/GC is required to extend you "Perfection" time period from 90 days to 120 days from last work done or provided for. That alone, is usually good enough to shake the leaves from the branches, so to speak.

If the lien is not "Perfected", you still have 2 years to file a lien, but your claimant status depreciates as far as precedential lien holders who are ahead of your status.

It is good business sense. Learn it, advise you will use it, and then properly file it.

Ed

Grumpy

I have printed on the back of my contracts that the contract is their notice of intent to lien, however I still send a notice. It is what I do before I call the lawyer and often times prevents me from having to call the lawyer.

Send it certified. Send it to all owners, and all banks who have mortgages on the property. Send it to any realtors involved in the property. Send it to ANYONE who may have a vested interest in the property.

wackman

You're only talking about when you have an issue right? You just have it printed on the back for all normal situations, or do you do that for every contract?

Grumpy

I'm at home so I don't have mys tandard terms of service, however there is a line on the back of all contracts which states something to the effect: "This contract serves as your notice that a mechanic's lien will be filed on all balances more than 30 days past due."

Yes it is only if I am having a problem will I actually send the preliminary lien. If the customer is not calling me back etc etc... However there is a process (I have processes for everything) and the preliminary lien is part of that process.

Usually the customer has 7 days from the day of the invoice to pay, that is if I don't go pick it up myself because all contracts state due upon completion. The 7 day is really a courtesy bcause of mail lag etc... OK ont he due date another invoice is sent, and quite often a reminder phone call (I'd say nearly every time the reminder phone call is made we get paid if the customer isn't being a dead beat.). Anyways a week after the due date a friendly reminder letter is sent and certainly they get the reminder phone call this time.

If it goes past that, I have got no call backs and it's 14 days past due, which is 21 days now since the job was compeleted, I get a little bit nervous. They are probably now going to get the formal collection letter, which is a bit less friendly and straight to the point. Pay us now or we will have to assess finance charges, and risk losing any discounts we may have offered. After 30 days and no contact from the customer they are going to get the formal colelction letter which is the notice of intent to lien.

If it's a repeat customer and they are providing an open line of communication, I will not send the notice of intent at 30 days. Certainly at 60 days I will send the notice to anyone no matter how responsive or friendly they are. 60 days is enough time to pay, no matter what.

Mud Master

I have had to put out 2 in my 12 years as a businessman. Though I have not had to put a lien on a project in 7 or so years, but I also, like Grumpy state that "Please pay promptly to avoid and interest charge of 2% on any balances remaining after 30 days." And on my contract it states "Any invoice with an outstanding balance over 65 days will serve as ground's for a mechanic's lien on the property/area in which the invoice is billed for".

However I am a pretty resonable man, and am not rushing to get the lien at 65 days on the dot. I try my best to work with my builders/developers for as long as I can. The group of builders/developers I have had for the last 6 years have never been longer than 45 days paying me for my work. It was a rare occurance with that lien I had put on that retail space, and it was not for a GC, it was a custom fit-out for a independant retailer. I do not do many of them anymore, not so because of that experience, but more so because I just don't have the time.

I do not file prelininary liens because I have total trust in my clients as I work for them exclusivly and I know when I am getting my money. However for someone in residential who is consistently dealing with customers they don't know from adam, it would be not only a good idea, but a priority to cover yourself in case the worst should happen.

IMO

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evansbrothers

I filed a lien on this vile HO a few years ago who wouldn't pay the final bill of a lousy $7,000. In DC it's an incredible pain in the ass to file liens. They make it extremely difficult to file the paperwork and the law keeps changing so you never know if the lien is really in effect. Not a contractor friendly town.
Anyway, I ended up having to actually go to court to defend my basis for filing. The HO filed complaints against us on every single DC consumer agency or government website she could find. Most of these sites have easy fill in the blank forms that are done online. The result was I had to also defend bogus accusations of sexual harrassment, discrimination, unfair and deceptive trade practices, etc. Each form she filed I had to respond to to get it dismissed. I spent countless hours writing letters to the different agencies and meeting with consumer advocates and govt. inspectors at the job or their downtown offices. In each case it was determined her claims were without merit but I still had to address all of them or risk losing my license and being labeled a disreputable company in the database.
When I finally went to court the judge said he understood I had a valid claim, that she owed the money, that her claims were BS and that I had every right to be furious. He also said she was demanding a jury trial and it would be another 6 months of this crap. Would I compromise? My lawyer (oh yes, I had that expense as well) said I should settle for $2000 and drop it. In the end after legal fees, filing fees, court fees, expert opinion fees and wasted time it ended up costing me $500 and untold internal damage from anger. At this point unless I'm owed over $20,000 I'll never do it again. People demand all kinds of credentials, referrals and certificates from the contractor (as they should) to show we're legit yet we're basically floating them an interest free construction loan with no credit report or assurance they even have a dime in the bank. Where's the database for deadbeat, thief customers? Its amazing how many HOs expect us to work for nothing. Many know that because of the hassle and expense involved in recovering what they owe us we'll usually let it go.

Same Old

I believe it's called Experian.

I lien notice all my jobs, it's right in the contract, just above their signature.

In Minnesota the wording is very specific, down to the font size.

If you don't know lien laws in your state you need to learn them. Now.

concretemasonry

The first thing to do is to UNDERSTAND the lein procedures AND rights!

They vary widely and some include the obligation to inform an owner that you are going to supply materials or services to improve his property. It all goes toward the property. If you are following legal requiremnts, no one can accuse you of being impartial and they will respect you for your business sense.

If am 15 miles from the Republic of Wisconsin and the legal differeces in the legalities are substantial between there and Minnesota.

Dick

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Dick

Engineer, designer and consultant recently active domestically and internationally on construction and design in about 35 countries.

jensenconstruction

In California if your the prime contractor working directly for the home owner you do not need to file a pre lien, your signed contract servers as sufficent notice. Only subcontractors who have no direct contractual relationship with the home owner need to file the pre lien. I had to go through this a couple of years ago and it stood up in court with no pre lien.

ultimatetouch

Grumpy do you have your contracts preprinted?
I print mine off of word with the template for the legal wording.
I would like to see what other guys looks like as far as the legal wording. I have had a customer not pay for three weeks. Seemed like a great lady and every time I would call no anwer and not returning the messages either. No response to emails. After three weeks I would call twice a day, then she would call me and tell me its in the mailbox. She does this to me everytime she pays me, making me sweat my ba**s off.
Its aggrevating as hell, but she pays. What are the rules in illinois, I put a lien on one ladies house because she told me she paid enough, and I was wondering if it stays on her house or if it expires.

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Ultimatetouch
Illinois Remodeling Company, Kitchen Remodeling Chicago, Room Additions Illinois

ultimatetouch

You must really be raking it in if your not worried about 7,000 thats a nut for me. I here what your saying, I had a scandalous lady like that.
Mine was over $800 but its the point not the money for me.

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Ultimatetouch
Illinois Remodeling Company, Kitchen Remodeling Chicago, Room Additions Illinois

Ed the Roofer

Ultimate,

You have 2 years from the filing of the lien to follow up and file suit for enforcement of the lien.

I have had liens outstanding for longer than 2 years, and when it came time for the HO to seek a re-fi, the lender required the lien to be paid off first, with interest. I don't know if that was the legal thing for them to do or not, but at least I got paid. they were probably just trying to cover thier own butts.

Ed

Jeff (socal)

Yup!. and its called 20 Day Preliminary Notice. Sub must have the owner sign the notice within 20 days after starting a job. If you are the prime you are suppose to have the owner sign the NOTICE TO OWNER upon signing of the contract, it basically states to the owner that you can put a lien on the property if you are not paid.

Teetorbilt

A 'Notice of Intent' to file has worked for me on the few instances that I have needed to exercise it.

Factoid: I've never come close to this on a primary residence, it's always been snowbirds second homes, rentals or flippers.

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jensenconstruction

Just a correction Jeff the owner does not need to sign the 20 day you can send it certified mail with return reciept. The return reciept is your proof that they recieved it. Even if they do not accept it and it gets returned to you; keep the unopened returned leter and that also counts as suffiencent notice.

IBUILD

I use a contract made up by the Attorney General, as long as I stck to my duties stated on the contract, Im covered. If they dont pay after having signed the contract, a Mechanics lien is placed on the dwelling and they have 30 days to pay or fight. By law, there are 3 ways to settle on the dispute, Binding Arbitration, trial by jury, or by Mediation.
I will only sign a contract that goes by binding arbitration and is checked off by the HO, signed and dated. This will be to my favor as long as I follow the statutes in the contract, win win situation!!
Found this out the hard way, and lost Biiig dollars by not having the proper document signed.

IBUILD

One more thing, if you have a contract written up by yourself, or use one that you get from Staples, burn it, its not worth the paper it is written on!!

RCPainting

In Utah, the state has developed a State Construction Registry. Part of license requirement is attending a 4 hour class on it. Basically it is a site run by state, every building permit issued generates an entry. All subs must file on it within 20 days of commencement of work. You also post when paid. Banks and title co's access it before closing and during the construction loan period. Homeowners can also access it. A lot of mixed feelings at the class, be interesting to see how it pans out. It is not meant to replace lein process, just inform all parties involved.