Why is the Mechanics and Materialmen’s Lien so powerful?
- The lien triggers a mortgage default. 100% of the mortgages have a clause that requires the owner to remove any liens that are filed against the property-these clauses are called negative lien clauses. Thus, if the owner of the property has taken out a loan and used the property as collateral, then that owner will be in default of the loan if a lien is not removed from the property.
- The lien is a cloud on the property’s title. The property cannot be sold nor borrowed against unless the lien is removed from the property.
- Often you get your attorney’s fees paid.
Why must I file the Lien?
Before a lien is filed, a letter must be sent to property owner and general contractor if any. The letter must be sent within 75 days of the date equipment was last furnished or labor last performed on the project, and contain specific language as required by the Oklahoma statute. The letter must be sent certified mail, return receipt requested. There are exceptions to the pre-lien letter requirement, but it’s always a good idea to send the letter. Liens are available to contractors and subcontractors. Contractors are those that enter into an agreement with the property owner. Contractors must file the lien 4 months of the date equipment was last furnished or labor last performed on the project. For subcontractors, 90 days. Beware! Remember to use the last date that the work was performed or material supplied rather than the invoice date.
Is my lien superior to other liens and mortgages?
Often, questions of priority exist between a mortgage lien, a judgment lien and others that have filed Mechanics and Materialmen’s Liens. Regarding the mortgage lien and judgment lien, the Mechanics and Materialmen’s Lien refers back and applies from the date the first labor or material is furnished to the project. So, if the work began on the project prior to the recording of a mortgage or judgment lien, then the lien of the contractor, subcontractor or supplier is superior If others hold valid Mechanics and Materialmen’s Liens, then they stand in equal status toward each other. In other words, the lien claimant who supplies material at the end of a project will be equal in priority to the lien claimant, such as an engineer or surveyor, who provided services at the beginning of the project.
I filed the lien, what’s next?
After the lien is filed, the County Clerk mails a copy of the lien statement via certified mail to all the parties. Some scallywags will not accept certified mail. So, remember to check with the county clerk to ensure that they received delivery confirmation. If the certified mail is not received, your attorney will use a private process server to provide notice of the lien. If the debtor does not pay the amount owed, then you are required to foreclose on the Mechanics and Materialmen’s Lien within one year of filing. Frequently, the property owner has more then one Mechanics and Materialmen’s Lien filed against the property. In such cases, the attorneys for the various lien claimants will discuss strategy, and the attorney representing the lien claimant with the largest claim will typically take the lead in the foreclosure action.
What if the debtor posts a bond?
A property owner can neutralize the Mechanics and Materialmen’s Lien by depositing with the county clerk either an amount of money equal to 125% of the lien amount, or a surety bond (called a lien release bond) in an amount equal to 125% of the lien amount. I see this tactic when the debtor disputes the charges or for some other reason feels that the charges are unjustified. In this case, you will need to foreclose on the lien as described above.
How do I get an extension of time?
I often hear from contractors that have missed a deadline. They ask something like “Can I send a crew to the project, perform some minor repairs, and extend the time to file the lien?” The general rule is that performance of repairs or remedying of defects, subsequent to the completion of the contract work, does not extend the time for filing a lien. There are still other remedies available to you. You may have a breach of contract action or unjust enrichment claim.
What if I already filed but made a mistake on the statement?
A lien statement may be amended except for the amount claimed.
Can I file a lien and still preserve a relationship with the client?
We can implement half measures that preserve your lien rights, yet still provide some breathing room for your customer. I have seen debtors ask the lien claimant to give up their lien rights in exchange for a promissory note or other inferior security. I strongly recommend that you seek advice from a lawyer before waiving your lien rights.
What if the property owner files bankruptcy?
Filing the Mechanics and Materialmen’s Lien converts your unsecured debt into secured debt. In other words, the property is collateral for the money that is owed you. In bankruptcy, your claim has a much better chance of being paid if you are a secured creditor.
How do I recover attorney’s fees, interest, and filing costs?
The majority of liens are resolved without the need for trial. Your attorney will ask for his/her fees, interest and costs in the negotiations, and if you have a strong case chances are you will get them. If the case goes to trial, then the “prevailing party” is awarded attorney’s fees. Since this is a two-edged sword, you will need to be confident in your case before filing suit.