How Forgiving is a Mechanic’s Lien if You Make a Mistake?
Good question, and one that directly effects your ability to collect. Before we answer this, it is important to understand there are essentially two bodies of law that can be applied to any situation: 1) general legal principles based on case law and 2) rights and obligations determined solely by state statutes.
An example of 1) would be a common claim for negligence. Assume one of your employees is driving to the job site and gets into an accident seriously injuring the other driver. This would be common-law negligence and to determine who wins, it is basically who has the better lawyer with better arguments. You can make a mistake in drafting your lawsuit and it can be amended. You can forget to enter a certain exhibit and ask the judge for an amendment according to proof. You can even change legal theories during trial. It is very forgiving.
Not so as 2) above. Some laws are the creature of statute and if so have to be done precisely. If not followed exactly, there is no mercy and you are out of court. These rules are strictly applied to the following:
1) The time in which to mail or file a preliminary notice or mechanics lien. If you miss it by one day the claim is invalid–no exceptions.
2) The kind of work or materials subject to a mechanic’s lien. For example, most states indicate that a supplier to a supplier cannot get a mechanic’s lien, no exceptions. For example this would apply to a manufacturer to a supply house.
But now the good news. Although you should always follow the exact content of a notice or lien, the courts or more are more liberal as to the wording. This is the rule of substantial compliance. If you have complied with most requirements of the statute and there is no prejudice, the fact that you don’t use in every word described in the statute will not prevent the lien.
But don’t go overboard. In one Michigan case (Vugtertveen Systems, Inc. v. Olde Millpond Corp., 454 Mich 119, 560 N.W.2nd43 (1997), a subcontractor was entitled to a lien even though it did not furnish any kind of written notice, based on the fact that he had a meeting with the owner before starting work in which the information provided by statute was given verbally. This is a highly unusual situation and in all in almost any case, it would be prudent, dare say necessary, to use a formal written notice.
Should You Include an Invoice With Your Mechanics Lien?
Almost no state requires the inclusion of an invoice when recording your mechanic’s lien. And in the states that do, you have the option of itemizing the services and charges in your claim or attaching an invoice. The mechanic’s lien form itself typically sets out the nature of the work, who hired you, when you started and finished, and the principal amount owed with offsets. But the invoice itself is not required.
Take for example ABC Company which owns and is developing a small apartment building in North Carolina. The professional developer hires DEF Company as a general contractor who in turn contracts with a number of subs, including John who is an electrical subcontractor. Obviously, John never meets the owner of ABC and has almost all of his contacts with the GC. In turn, The GC has met the owner couple of times, but deals primarily with their project manager.
John has been told to perform three rather expensive change orders directly from the GC, who in turn received directions from the owner. The times are tough for the GC and it has been unable or unwilling to pay anything on those extras. Finally, John has no option but to file a mechanic’s lien for those unpaid amounts. By the way, this discussion has the same recommendation if the GC is the one who has not received payment because communications are not filtering through to the owner.
This is not only a non-payment situation, but one of non-communication. The owner has already made payment to the GC on all three change orders and literally does not know payment has not filtered down to John.
This is where the invoice comes in handy. When you file mechanic’s lien, you will also serve the owner and general contractor. In the same envelope will be a fully itemized bill showing what was not paid, together with copies of the change orders. Now the owner knows not only the facts, but their gravity. There is more of a chance the owner will take steps to issue a check directly to John or a joint check with a lien waiver.
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