Most folks give credit to the creation of the modern Mechanic’s Lien to one of our forefathers, Thomas Jefferson, who introduced the first legislation in the US. However, it’s unlikely he came up with the original idea, as similar legislation already existed across Europe.
The Mechanic’s Lien served a vital purpose in the development of the United States. It gave the builders a security interest in the land being developed. This gave the builders comfort, knowing they would be protected.
Where Does the Word ‘Mechanic’ Fit into Construction Work?
When the legislation was first written, there was little if any mechanical items, machines or equipment. At that time, the word mechanic meant anyone who used their hands to build. Today’s meaning of mechanic did not come into existence until the invention of the automobile.
What is a Mechanic’s Lien and How Does it Protect Me?
The Mechanic’s Lien is a legal document that allows you to seek unpaid compensation for work that was performed at a project by contractors, subcontractors or suppliers. The types of projects and work that are lienable will vary from state to state, so you must understand the individual state rules and regulations.
In general construction, work is lienable if the work renders “permanent improvements” to the real property. To improve generally means to build, place, make, alter, remove, repair or demolish as it is connected with or below the real property.
This also includes improvement of the land including excavation, grading, trenching or landscaping. Permanent is often described as any item that is incorporated into the structure, and in essence becomes part of the structure.
Using supplies or materials that become affixed to the real property is also generally considered part of the improvement. This is not just for new construction, but any improvements, including remodeling or refurbishing.
What Happens After Filing a Mechanic’s Lien?
Once the Mechanic’s Lien is filed, several things occur. First and foremost, it gets the attention of the General and/or Prime contractor and more importantly, it gets the attention of the owner.
Many times just the presence of the lien will get you paid. If not, the lien can serve many other legal purposes, such as the “nuclear option” which includes collecting from the property. That means the real property can be sold to pay your claim.
How Do I Claim a Mechanic’s Lien?
The steps to claim and protect your lien rights vary from state to state, and they can be numerous and confusing. Generally, at the bare minimum, it includes filing notices to the GC and owner (in pre-notice states).
Your claim must also be filed within the allowed period. This ‘allowed period’ is usually triggered by the last date your services were furnished at the project.
If you’re a large contractor, you likely have the experience and resources to manage the process. For smaller businesses, there are firms you can pay to engage and they will file all the notices and keep track of the project throughout the entire process, from start to finish.
When you use CapitalPlus we do this for our customers. We manage the whole process from beginning to end at no additional cost; it’s included with the receivables financing. We file all the required paperwork, make sure they’re in on time, and track the project against statutory requirements.
This frees up your time and allows you to focus on doing what you do best… getting your work done.
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