If you are a building contractor, especially if you operate a small business, then you need to be familiar with your state’s mechanic’s lien laws. If you use these laws properly, they will become an important tool to assure that you get paid for your work.
What is a mechanic’s lien? Think of it as a type of mortgage. If you don’t pay your mortgage, your property can be sold to pay the mortgage. In the same way, if you do not get paid after creating a mechanic’s lien, the property where you did your work can be sold to pay you for your work. That is a very powerful tool to make sure you get paid!
Unfortunately, mechanic’s lien laws are different in every state. So, you need to know the laws in the state where your work is performed. This blog focuses on Massachusetts law. While there may be similarities between the law in Massachusetts and the laws in other states, every state has its only particular rules and requirements. So, don’t rely upon the information here for any other state.
The process of creating a mechanic’s lien begins by filing a “Notice of Contract” in the Registry of Deeds where the property is located and giving notice to the owner of the property. You generally need to have a written contract in order to have a mechanic’s lien. Also, you need to be working on private property, as you cannot put a mechanic’s lien on federal, state, county or municipal land.
You may file your Notice of Contract any time after you sign your contract until 90 days after the last date that any work was performed or materials were furnished to the project that you worked on. But, there are exceptions and limitations to this, and you really do not want to wait to the very last day. We recommend that you file your Notice of Contract as soon as you start feeling insecure about your payments, which might be very early in the job or even before you start your work. Once you file it, the odds are that you will be paid on time for your work.
The first time you file a Notice of Contract, it is a good idea to use a lawyer. You should have your lawyer explain all of the details of the form, how to complete it properly, and how it is filed. If you do this, you should be able to file it in the future by yourself, without a lawyer.
In the event that you are owed money after the project has been completed, you will need to file a “Statement of Account” within 120 days after all work was done on the project and, if that doesn’t get you paid, then you will have to file a lawsuit within 90 days after your Statement of Account. Unless the amount involved is very small, we recommend that you hire a lawyer to file your Statement of Account. It is not difficult, but it is very easy to make a mistake and lose your lien rights.
General Counsel says: Collecting on time what is owed to you is critical to the success of every business. There are many important aspects to the successful collection of receivables, which include choosing carefully with whom you are doing business, having good contract provisions, carefully keeping track of unpaid receivables, and knowing how to enforce your contract rights. The mechanic’s lien laws were designed to be another tool for contractors to be sure that they get paid for their work. Every successful contractor must know how and when to use a mechanic’s lien.