Filing a lien is a significant legal step that should be used only after all other alternatives for payment have been exhausted. It is advised that you first contact the party that owes money in order to set up a payment plan or alternative method of collecting payment. Another option is to hire a debt collecting service to circumvent the formal legal procedure of a lien. If all efforts to get paid fail and filing a lien against the other party is the only option left, you can do so by following these procedures:
Step 1: Preliminary Notice
Depending on your state’s legislation, you may be compelled to advise the debtor that if nonpayment continues, a lien would be issued. Some states need a document to be submitted to issue notice, which may generally be acquired from the clerk of courts.
Other states may have time constraints for providing notification. Many states require that a preliminary notice of a lien be supplied between 10 and 20 days after the start of work. It is customary practice to notify parties from the start that a lien will be issued if payment is not made.
Since state laws vary, in case you are unclear if you need to submit a notice or how many days you must tell the debtor, you should speak with an expert lien lawyer who can help you through the lien filing procedure.
Step 2: Check the Deadlines
You only have a specified length of time upon finishing the task to petition for a lien, and in certain regions, this period is as little as 60 days. If you want to maintain this option, depending on where you live, you may not have enough time to pursue all those other options before filing a lien. This leaves you with little time to investigate alternate means of collection.
Step 3: Assess the Property
To register a property lien, you should first do a title check to guarantee the property belongs to your client and obtain the entire legal specification from the title deed. General contractors who register a lien before the cut-off date in some jurisdictions, like Illinois, enjoy precedence above any other impediments on the asset, even if another rival lien happened previously.
Other liens on property that take precedence over yours may imply that even though you filed a lawsuit and had the estate auctioned off, you would not be able to recoup any funds, and the bill would stay unpaid. If there are other creditors with property liens, you’ll need to consult a lawyer to determine how those debts are legally prioritized and if you should explore alternate ways of collection.
Step 4: Create the Lien
A lien is often a one-page document that includes information on the creditor, debtor, and asset. Most jurisdictions need you to complete specific court filings.
Understand the terms of the components of the county in which you intend to file the lien since many have rigorous standards regarding text type, margins, and paper size. If you do not adhere to these guidelines, the court will decline your lien.
Step 5: Fill Out the Lien Form
Your lien should be lodged with the clerk of court or the estate recorder’s department. Each state has a particular office that accepts mechanic’s liens, so ensure you have the appropriate one. If you want to claim a lien on real estate, you must file it with the recorder’s department where the property’s county is situated.
Depending on where you file, anticipate paying an application fee of $25 to $50. Although you may usually lodge your lien by mail, you may wish to present it physically. This is especially important if you’re filing close to the deadline since most offices have a stockpile of mail filings. Furthermore, filing physically ensures that if something is incorrect with the lien, you can find out about it and remedy it right away.
Step 6: Notify the Necessary Parties
Parties should be notified. Most states require you to inform the owner of the property as soon as you lodge the lien. Other parties, such as other lien claimants, may be required to be informed in some states. In many circumstances, the owner of the property will organize to settle the amount as soon as you notify them that you have filed a lien.
Step 7: Enforcement
If the borrower fails to pay after you have lodged the lien, you must enforce the lien by bringing a foreclosure case within a particular time frame, which is generally a year. The property is sold as a result of the foreclosure suit. The sale revenues are used to pay off any property liens.
Review your state law to learn how long your enforcement window is. When the enforcement term expires, your lien becomes null and void. Other states have unusually low time limitations for enforcing laws.
Since launching a foreclosure case requires presenting a written complaint in court and following the court’s rules, you should consider hiring a lawyer that deals exclusively in foreclosures or executing mechanic’s liens.
The procedure for filing a mechanic’s lien varies by location. Mechanic’s liens can be obtained by nearly anybody who provides labor, services, or supplies to a real estate renovation project. It is used to extract money from real estate by enforcing a lien on the property and, if required, allowing the lien holder to go to court to have the property auctioned off.
A mechanic’s lien must be documented with a relevant municipal or state agency in the county where the labor or supplies were given for the project. If the contractor who files the lien is not licensed, the lien will be deemed null and void. Furthermore, lien regulations do not apply to providers that have only provided to other suppliers and not directly to the project.