[Note: This one of a series of six posts regarding mechanics’ liens:
In the first article in this series, we discussed the basics of credit risks associated with subcontracting in an area other than construction. In the second, we examined how a mechanic’s lien reallocates those credit risks for construction contracts. In this one, we explain how a contractor or subcontactor goes about acquiring a mechanic’s lien. For a change of pace, we’ll do it in a question-and-answer format.
Some caveats: First, mechanic’s lien requirement vary significantly from state to state. Given that this is the Indiana Business Law Blog, we’ll answer the questions based on Indiana law. Also note that the Indiana Mechanic’s Lien Statute is filled with complicated, cumbersome, even archaic language that can be difficult for even lawyers to parse, so we’ll try to give answers that are more easily understood. However, that also means we may leave out some details, making the answers a bit imprecise in some circumstances. As always, this blog is not legal advice and you should not rely on it as a substitute for legal advice.
Who can acquire a mechanic’s lien?
Generally, anyone who furnishes labor, materials, or equipment (including leased equipment or tools) to the construction, repair, or removal of a building or structure, or to any other earth moving operation, is entitled to a mechanic’s lien on the building or structure and the land where the construction, repair, or removal was performed. In addition, registered architects, registered engineers, and registered land surveyors are entitled to hold a mechanic’s lien. The person who provides the labor, material, or equipment may do so in a contract directly with the owner of the land or under a subcontract.
How does someone go about acquiring a lien?
First things first. On some types of projects — specifically on the original construction a single or double family dwelling, intended to be the residence of the owner of the land on which it is built, or on the repair or alteration of an owner-occupied single or double family dwelling — there is a requirement for a “pre-lien notice.” Anyone providing labor, material or equipment to such a project must notify the owner in writing that the person is providing the labor, material, or equipment and that the person has rights to a mechanic’s lien, unless the person provides the labor, material, or equipment in a contract directly with the owner. (The idea is that the owner already knows about the people who hold contracts directly with the owner.) If the project is the new construction of the dwelling, the notice must be given within 60 days after the person first provides labor, material, or equipment to the project. If it is the repair of a dwelling rather than new construction, the notice is due within 30 days. If the notice isn’t given, there’s no right to a lien later.
Does the pre-lien notice have to be recorded in the office of the county recorder?
No. It has to be in writing and furnished to the occupying owner or the owner of record of the property, but it does not have to be recorded.
Okay, assume the person provided a pre-lien notice or that no pre-lien notice was required. Now what?
A person entitled to a lien must file, in duplicate, in the office of the county recorder a sworn statement and notice of intention to hold a lien. The sworn statement and notice of intention to hold a lien must include all of the following information:
- the name and address of the person making the claim
- the amount of the claim
- the owner’s name and last address as shown on the county’s property tax records
- both the street address and legal description of the property where the project is located.
The statement must be notarized and satisfy all other requirements for recording documents.
The statement and notice must be filed within either 60 days or 90 days of the last day the person making the claim furnished labor, materials, or equipment to the project. The deadline is 60 days for “Class 2” structures — essentially single or double family dwelling units and related structures–and 90 days for all others. The lien attaches immediately when the notice is filed with the county recorder. The county recorder will then send a copy of the statement and notice to the owner.
If you have a question about a mechanic’s lien, whether you are a contractor or the owner of a construction project, or if you’d like to avoid mechanics’ liens with a good construction contract, please feel free to contact us for an initial consultation.