I need to get a few examples of how some outfits handle material and labor liens in the general couse of business. More to the point, I hear that some of you will file to place a lien on the property you are working on as a matter of course, even before final payment is due.
I am about 50% residential and 50% commercial and expect to grow rapidly. I have been told to at least file a lien on the subject property as you make your progress and/or final billings. Am I stupid to not follow this practice?
Some advise please…………….
Oh, by the way, I am a sub(mason)
Replies
Who told you this? Your Lawyer? :) Not common practice around here.
Brudoggie
http://biz.findlaw.com/operations/equipment/faq432.html?operations/ca
You should talk to a lawyer if you can file a lien before "you have not been paid". (edit: before you have billed and not been paid as agreed to)
You need to consider what the GC's relationship with their customer will be like when they get notified about a lien on their property and the resultant GC's relationship with you will be like.
What is the cost of filing and removing liens where you are? How will this effect your cost of doing business?
bobl Volo Non Voleo Joe's cheat sheet
Edited 9/18/2002 7:54:25 AM ET by bobl
Since it costs about $300 to file a lein (I think) I'd say it was a waste of money if you don't have to do it.
I think around here that you have 90 days to file a lein. But if you send them a notice of intent to lein, it gives you more time.
Are you having so much trouble getting paid that you feel you have to do this? Or is your lawyer just saying this is good business practice?
Q. How can you tell that a blonde sent you a fax?
A. It has a stamp on it.
Thanks for the reply. I'm not having trouble getting paid, per se. It's just that one's payment for a particular contract may well be close to the 90 day window(I have a payment due me since 7/25 and another from early August). You know, lawyers tend to be tight lipped unless they are sure that the meter is running. Plus, they are not contractors and their advise (though legally correct) may not - in every respect - work with us contractors.
Thanks for contributing to the discussion. My goal is to get an feel for what standard practice is, if it exists.
Mhinshaw,
We are in southern Ontario, Canada, so wording of the lien law and common construction practices may vary significantly between our locales, but that noted...
If you were to place a lien on one of our projects for no particular reason and in advance of even submitting your progress claim to the gc, we would likely reword our specifications to prevent you from working on any of our jobs in the future.
Why force the owner and the consultant to enter into the onerous task of discharging a multitude of groundless liens on a project where no indication of the gc's intention to default exists? Remember that when word gets around about liens being placed, people get scared and everyone on the project gets in line to register.
Ontario lien legislation allows 90 days after the publication of substantial completion of a project for the registration of liens. Within this amount of time, you should be able to make an educated guess on the likelihood of the gc defaulting on your contract.
When all reasonable means of securing an earned payment have been exhausted, you should certainly register a lien to secure as much of your payment as you can. It is your ace-in-the-hole final resort, set up to ensure that an owner who benefits from your efforts on their project will provide you with some financial compensation, even if the gc dissolves or starts to behave irrationally. It has a purpose, and it makes sense.
It is not, however, some form of payment insurance to be invoked groundlessly to the aggravation of those around you.
Getting buildings designed and constructed is complicated enough. If you decide to add a further layer of complications for the gc, the owner and ourselves by routinely and indiscriminately registering groundless liens, the fastest way for us to simplify the process is to remove your company from the equation.
Again, we work in southern Ontario. Your local construction practices and the wording of your lien legislation may differ significantly.
Hope this helps.
I have a court date at the end of the month taking a non-paying customer in front of the local magistrate......so far as I understood....I couldn't file to lean untill after I win a magistrates decision.
Might be talking apples and oranges...not sure....this is a first for me. I was told I could send an intent to lean....but that was just a warning shot....I prefer to leave it in the hands of the magistrate and see what the outcome is.
Jeff.......Sometimes on the toll road of life.....a handful of change is good.......
Could you mean a stipulation of (against) liens? I just had a situation where I started a project before a custome had financing in place (misrepresentation) and I'm learning about this particular instrument.
Tom
What you want to do is give the homeowner or property owner a "preliminary 20 day notice". This informs the owner of your right as anyone who does work which improves the value of a property or structure to file a lein on there property if you are not paid. Even if they pay the general and he does not pay you. Trust me it has happened. You can also file this form with the city so it is on record. The reason why it is called a 20 day notice is because you have 20 days from the beginning of work in which to file this notice. Other wise you give up those rights forever. Then you will have to take them to small claims court. Talk with your attorney about this procedure as he will have more info as it pertains to your state in which you conduct business.
you really need to find out the laws for your particular state. GA has no 20 day notice. The lien just has to be filed within a certain time period after the last day material or work was provided. (two months IIRC) You then have one year in which to file suit against the property owner. I don't think there is a fee involved in filing here. Just be aware of the amount of time you have to file the lien in. Don't ask how I know about this stuff.
I am very aware of the laws in my state. People need to spend more time focused on the "business side" of remodeling. If you have your system in place before you have a problem then the chances of having a problem are much smaller.
I had to file a lien last fall for the second time in 30 years.
Being the independent sort who has no particular fondness of lawyers, I filed it myself.
I stopped down at the local office supply store where I purchased the lien form for $.15 (yes, that's fifteen cents) and proceeded to the courthouse about four blocks away, where it took me twenty minutes total time to fill out the form and register it. Cost was $15.00
After the deadbeat paid up one week later, I picked up a release of lien form and underwent the procedure again. 10 minutes........no fee involved.
Am I about to pay some guy $300 or more to do this for me? ................I don't think so. Didn't fall off the turnip truck yesterday.
Granted, this was a simple lien in a simple situation.
Oh yeah........the guy filed for bankruptcy three weeks after I got my money.
In California it is a three step process.
First, file a Preliminary Notice serving the same on the owner of the property and the tenant if any.
Second, within 90 days after the completion, one files the actual lien.
Third, within 90 days of the filing of the lien, one files a lawsuit to foreclose against the property.
Meet with a lawyer in advance, he will make up two of the three forms (the 1st two) and we generate them in house. Cost is less than $50 for both. The Preliminary Notice is good business sense and will let the owner know that you are a professional, that you have rights, and what his obligations are. Never had a collection problem, not ever.
Boris
"Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1927
I appreciate all of your responses. My (now) standard contract gives, I believe, the initial notice of my right to place a lien on the subject property. I wanted to develop procedures that protected my money without getting a screwing from the general contractor. Like I may have mentioned, I've talked to some other guys(eccentrics, maybe) who recommended that I follow their practice of actually FILING a lien for the amount of work billed out, at the time of billing.
Up until now, all of my work was residential and only by referral, so the thought of ever needing to understand the processes never crossed my mind. I'm playing a different game now, and wanted to become savvy.
To that end, I want to say "THANK YOU" to Taunton Publishing for making available this forum.
The filing of a lien without due cause threads awfully close to slander of title. Watch your ####.
dl
Our developer did not pay for a dam he had to put into the subdivision, and the dam builders liened the entire subdivision. They not only liened what the developer owned, but all the privately owned lots too including ours. It was an illegal lien, BUT, it still shut down all the building in the entire subdivision. The banks financing our neighbors houses refused to give any draws until the lien was removed. Not exactly a good way to get paid if the bank won't shell out any cash.
Liens are serious business and we as homeowners had some real and documented damages that we could have sued for. We all had better things to do, like build houses, but the advise you got seems counterproductive to me.