These 5 Mistakes Could Cost You Your Lien Rights
When handled perfectly, the mechanic’s lien is arguably the strongest weapon in a contractor’s arsenal for dealing with an owner that refuses to pay. But when information is incorrect or deadlines are missed, the mechanic’s lien is just a worthless piece of paper. Over time, amendments to Tennessee’s lien laws have helped make the mechanic’s lien process more efficient, but it’s still littered with potential pitfalls that must be avoided at all costs if you want to obtain due payment.
In this editorial, a Knoxville construction lien lawyer from Cotney Attorneys & Consultants will discuss five mistakes that have been known to cost contractors in the Volunteer State their lien rights. Next time an owner withholds payment from you, don’t jeopardize your right to payment by filing a lien without the help of an experienced lawyer. Even the slightest mistake could limit your ability to get paid.
1. Focusing on the Wrong Dates
When it comes to meeting mechanic’s lien deadlines, contractors should always focus on the date of the final provision of labor or materials and not the date they billed the work. This is a common mistake, but one that can be easily avoided. Since subcontractors and general contractors have different lien filing requirements, you need to understand your role within a project and act accordingly. For example, a general contractor has one year from the final furnishing of labor or materials to enforce a lien. On the other hand, a subcontractor must file a lien within 90 days of their final day of work, and then enforce the lien within 90 days from the filing deadline. It can be a lot to keep track of, which is why many contractors choose to partner with a Knoxville mechanics lien law attorney that will handle this responsibility for them.
2. Neglecting to Serve a Timely Notice of Nonpayment
In Tennessee, all subcontractors who intend to file a mechanic’s lien must serve a Notice of Nonpayment within 90 days of the final provision of labor or materials. Furthermore, the subcontractor must send separate notices for each month that they provided services or materials without compensation. Once again, focus on the last date of work, not the date of billing; otherwise, you could find yourself stripped of your lien rights before you even have the opportunity to file or enforce a mechanic’s lien.
3. Failing to Provide the Requisite Information in the Notice of Nonpayment
Tennessee lien law mandates that a Notice of Nonpayment include certain bits of information. Failing to include the following information could result in your loss of lien rights:
- The contractor’s name and address for correspondence.
- A general description of the work, labor, materials, services, equipment, or machinery provided.
- The amount owed at the time the Notice of Nonpayment is issued.
- The final date on which provisions of labor or materials were provided.
- A suitable description of the property that can be used to identify it accurately.
4. Sending the Notice of Nonpayment to the Wrong Party
Subcontractors must send the Notice of Nonpayment to both the owner and general contractor. Failure to do so can invalidate a lien claim, as can sending the Notice of Nonpayment to the incorrect party. This might seem like a foolish mistake, but it happens quite frequently. This is because many contractors wait too long to kick off the lien process. As time runs out and they can’t recall the identities of the owner and general contractor, they end up sending the Notice of Nonpayment to the wrong party. One way to avoid this is to consult a Knoxville construction lien lawyer as soon as you don’t receive payment. The longer you wait, the less wiggle room you have to correct your lien filing.
5. Accepting Lien Waivers and Releases
Another way lien claimants in Tennessee accidentally forfeit their lien rights is by signing and submitting a partial lien waiver that doesn’t uphold their lien rights for the remainder of a project. In many cases, these waivers (usually standard or boilerplate documents) are written in a way that waives “all claims and lien rights.” Sometimes, contractors sign these waivers without thinking anything of it. Of course, when they realize that they no longer have lien rights, it’s not hard to trace the cause of their dilemma back to the source.
When releasing your lien rights, even partially, it’s advisable to consult a Knoxville construction attorney to review the waiver first. Then, you can proceed knowing that your lien rights are protected. You should also insist on adding language to a waiver that clarifies its scope, especially when change orders are involved. Our Knoxville construction attorneys recommend the inclusion of a clarifying statement, such as: “This waiver does not apply to [describe change order, extra work or claim and amount thereof] and the contractor expressly reserves all lien rights for work that has yet to be completed or paid for.”
Preserving your lien rights is vital if you want to maintain profitability and protect your bottom line, and a Knoxville construction lien lawyer from Cotney Attorneys & Consultants can help. Our lawyers are intimately familiar with the mechanic’s lien process and understand how to avoid the pitfalls that have caused contractors to forfeit their right to payment in the past.
If you would like to speak with a Knoxville mechanics lien law attorney, please contact us today.
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.