Managing difficult customers is an unavoidable part of running any residential construction business. While homeowners generally pay, sometimes contractors and suppliers must chase invoices. There is a procedure available in Massachusetts that can help – that allows contractors and suppliers to obtain a security interest in the property on which they have worked. The interest is known as a mechanic’s lien, and it can be the difference in whether you get paid.
The process for obtaining a mechanic’s lien is technical and unforgiving. Contractors, subcontractors, sub-subcontractors and suppliers must each jump through different hoops. Timing and deadlines are critical. In some cases (a sub-subcontractor, for example) a notice must be served very early in the process – within 30 days of commencing work. In others, the deadlines come later. Regardless, once obtained and perfected a mechanic’s lien can be a powerful tool to allow you to recoup what you are owed.
A Homeowner is Behind on Payment
Dan Conroy, a commercial litigator with Sassoon Cymrot, has represented clients in all manner of business disputes, including construction litigation. He suggests that any construction business consult with an attorney to fully understand the mechanic’s lien process.. “A mechanic’s lien is something that, when it’s in place, acts very much like a mortgage or any other lien on a property. It establishes your place in line,” Dan says. “What it’s designed to do is to protect people who have provided labor and/or materials on construction projects, including residential construction projects. The lien provides you with a security interest in the property so you know that you can be confident you’ll get paid if you obtain a judgment.”
Filing a Mechanic’s Lien
Every state has its own laws about liens; here in Massachusetts, Chapter 254 of the General Laws addresses liens filed by a construction business. Generally speaking, anyone who has done work on the property or has provided materials for the property may be entitled to obtain a mechanic’s lien, but only if they comply with the applicable statutes. The requirements are technical and vary with the type of entity attempting to establish the lien. General contractors, subcontractors, sub-subcontractors, and suppliers each must complete a series of steps – on time and in the appropriate order. Strict compliance with timing and recording requirements is critical. There are deadlines associated with virtually every step of the process, and they must be met.
The process is unforgiving. Dan says the actual filings can usually be accomplished quickly. “Typically an attorney will file the day they get a call from the client, or the next day, but the statutes are complex enough that it’s easy for a contractor to make a mistake and lose its chance to record or perfect a lien.”
Should I Bother with a Mechanic’s Lien?
You should certainly consider a mechanic’s lien. While you may sue your client without one, taking the steps necessary to establish and perfect a mechanic’s lien allows you to put the homeowner on notice that you are serious about receiving payment, and that you are looking to the property for security. That alone may allow you to avoid having to bring suit.
“If you’re likely to be willing to sue over it, you absolutely want to take the steps necessary to obtain and perfect a mechanic’’ lien,” Dan says. In many cases, perfecting the lien may be enough to cause the homeowner to pay. “For example, the homeowner’s mortgage may require that mechanic’s liens be paid. Or the presence of the lien may create problems if the homeowner tries to refinance. Mechanic’s liens are something that everyone involved in residential construction should understand.
While not, strictly speaking, a mechanic’s lien issue, Dan also suggests that “If you’re a contractor, you should have a lawyer look over your contract if you haven’t done that before; and if you don’t already have one, you should certainly try to include an attorneys’ fees provision.” That can allow you to pursue even smaller debts through the mechanic’s lien process.
Sassoon Cymrot, LLC is always here to help construction businesses protect their interests. If you’re working with a homeowner who is falling behind with their payments, don’t wait to look for solutions. Contact us today.