Protecting your hard earned dollars with mechanic's liens

The creation of the lien is credited to Thomas Jefferson circa 1791 to encourage construction at a time when housing conditions in the new capital of Washington was in a deplorable state. Mechanic's liens, in some states known as construction liens, are an instrument developed to protect contractors, suppliers and other parties participating in a construction project from non-payment and to encourage completion of these projects with minimal interruption. This document attaches to the title of the property so that it appears when a title search is performed, thus giving the lienor a security interest in the real property. When a mechanic's lien is filed the lienor notifies the owner of the property, and any other company involved in the project between the lienor and the owner, that a lien has been filed and that the lienor has not been paid. When a property is sold or refinanced, a property search may be performed by the lender or purchaser and may hinder a loan, a refinance or even a sale of the liened property. Mechanic's liens on real property are statutory and exist in every state and have been instituted to protect contractors and subcontractors against the economics of the construction business, in order to provide them with the protection against non-payment for their work. The Lien Law allows for additional protection to the general contractor, subcontractor, supplier, architect or engineer, so that they do not solely rely on the right to sue on their contract. Without the mechanic's lien law, subcontractors, suppliers and others would have to rely strictly on the financial responsibility of their customer, which could result in decreasing the amount of material they are able to supply or the amount of work they are able to perform before getting paid, which in turn could result in delaying the job, increasing the length of time it would take to complete a project. Without the lien law, the probability of getting paid on a construction job would be greatly reduced. The filing and enforcement of these liens differ from state to state but overall the concept of liening remains the same. To file a lien you need to comply with a number of statutory regulations, including timely filing. For example in the state of New York you have 8 months, from the last date on the job or the last date of delivery, to file a mechanic's lien on commercial property but only 4 months for single-family properties and condos. In New Jersey you only have 90 days from the last date of substantial completion, while in Pennsylvania you now have 180 days and in Connecticut 90 days from the last date on the project. Unlike private liens as described above, mechanic's liens (construction liens) on municipal or state projects do not attach to real property, but directly to available funds on these projects. A public lien on a municipal or public project will hold the amount claimed from being disbursed to general contractors until your claim is satisfied. Mechanic's liens on federal construction projects are invalid. To protect subcontractors, suppliers and others working on federal projects the Miller Act has been established. The Miller Act requires general contractors to provide a Payment and Performance bond which pledges payment for work performed and material supplied. All federal projects with contracts larger than $100,000 require the general contractor to obtain such bond. Some states and municipal governments, just like federal projects, also require general contractors on public works projects to be bonded. Since the states have adopted this procedure from the Federal Government, they have called it the "Little Miller Act." However similarly to lien filing, there are specific parameters that a claimant must comply with in order to file a bond claim. If you are a general contractor, subcontractor, supplier, architect, engineer or a laborer of any trade on a project know your lien rights. Don't give up the protection that is there for you. Remember that the lien law changes from state to state and that there are a number of statutory requirements to comply with. Be sure to contact a lien professional when filing a lien. Jerry Manna is president of Manna & Associates LLC, Kearny, N.J.