Mechanic’s liens are a powerful tool in the construction industry for helping contractors collect compensation for work performed or materials provided. This is crucial as all construction professionals are familiar with the domino effect that happens when an owner fails to pay a contractor on time. Working capital and cash flow can vanish in an instant. That being said, lien law is complex and riddled with deadlines. It’s equally as easy to lose your lien rights in a second to even the smallest of mistakes.
Fortunately, you don’t have to navigate the process of filing a mechanic’s lien on your own. At Cotney Construction Law, we are highly experienced in lien law, have a firm understanding of the requirements to file a lien in Indiana, and have perfected liens for countless clients across North America over the years. If you are looking to comply with the appropriate requirements and deadlines for the filing of your mechanic’s lien, it’s time to reach out to an Indianapolis contractor lawyer with Cotney Construction Law.
What Is a Mechanic’s Lien?
The mechanic’s lien is easily one of the most confusing legal tools in North America, which is why it’s so important to familiarize yourself with its definition, applicability, and requirements. In simplest terms, a mechanic’s lien is a legal document filed by a contractor, subcontractor, supplier, or other construction professional for the purpose of receiving unpaid compensation for the work they performed or materials they provided for the construction project. This type of legal tool has been around since the 1790s and can be filed on most any private construction project, whether the project is residential or commercial.
When you file a lien, this legal document is recorded with the land records and appears on the title search of the property, meaning that anyone who buys or accepts the property after the recording of the claim accepts it subject to the claim. Given that banks and lenders are generally unwilling to refinance homes or lend against a property with outstanding liens, it’s likely that the property will not be sold until the liens are dealt with. It’s a nuisance for property owners and acts as major leverage for those construction professionals.
When Should You Consider Filing a Lien?
Knowing when it may be time for you to consider filing a mechanic’s lien is one of the most important steps in the process of receiving overdue payment from an uncooperative owner. Prior to filing a mechanic’s lien, you should make every possible effort to resolve payment disputes, such as reaching out by phone, emails, and letters. You may also want to consider sending a demand letter that outlines the specifics of the payment dispute and the legal consequences of not resolving it. Either one of these options may be enough to motivate a delinquent owner into resolving the dispute. However, should your demand letter and contact attempts be ignored or the owner continuously demand that the project first meet changing specifications, then you’ll know that’s time to file a mechanic’s lien.
How to File a Mechanic’s Lien
If you have decided to file a mechanic’s lien in Indiana, we’ll provide you with step-by-step guidelines on how to go about it below. It’s important to remember that the only parties entitled to mechanic’s lien protection in the Hoosier State are contractors, subcontractors, equipment lessors, suppliers to prime or subcontractors, and laborers. Suppliers to suppliers do not have mechanic’s lien rights in the State of Indiana. If you have any concerns about meeting the deadlines or requirements associated with filing a mechanic’s lien in Indiana, consult one of our Indianapolis construction attorneys.
Serve a Preliminary Notice
Not only is it a best practice in the construction industry to send a preliminary notice on each of your construction projects, but it’s also a requirement for certain types of projects or contract amounts in order to file a lien. Even if you don’t go through with filing a mechanic’s lien, sending a notice ensures that your right to file a mechanic’s lien is preserved in case something does go wrong with the payment you’re owed on that project. In Indiana, subcontractors are required to provide preliminary notice on owner-occupied residential projects either within the 60 days of first furnishing for new construction or within 30 days of first furnishing for renovation projects.
File Your Mechanic’s Lien
Once you’ve sent a preliminary notice (if necessary), the next step is to move forward with filing your mechanic’s lien. The deadline to file in Indiana is 60 days on residential projects and 90 days on non-residential projects, calculated from the last day you provided either materials or labor for the project. Indiana law requires that your lien claim must be sworn to or verified and contain the following information:
- The amount claimed
- Your name and address
- The owner’s name and address
- The legal description, street, and number (if any) of the property
In order to properly file your lien, you must prepare duplicate forms, sign your document in the presence of a notary, deliver your lien to the proper county recorder, and, if necessary, give the owner written notice within 10 days of recording a lien. This last step is only necessary when you’re the original contractor performing work or supplying materials to an owner-occupied single-family residence.
Enforce Your Mechanic’s Lien
Finally, you’ll generally have one year from the date the lien was received for recording to enforce your mechanic’s lien. The only opportunity the property owner has to shorten the time in which the lien must be foreclosed is to send a 30-day Notice to Foreclose. Should you receive this notice and fail to initiate a foreclosure action within the 30-day time period, the lien will be released. If you have any questions about enforcing a mechanic’s lien in the State of Indiana, get in touch with an Indianapolis construction litigation attorney from Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.