Mechanic’s Liens: Part Two. Practical Risks

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A mechanic’s lien is a powerful tool to secure payment for construction work.  As discussed in the last article, however, there are technical requirements to prepare a mechanic’s lien.  Heads Up Sprinkler lost its mechanic’s lien after five years because it failed to include a statement that it “intended to claim the benefit of the lien.”  Unfortunately, Heads Up also faced practical issues trying to enforce its lien.

Heads Up filed an appeal of the lower court’s decision finding that the lien was invalid.  The Supreme Court of Virginia, however, found that the lower court’s decision releasing the lien was an “interlocutory” order and not subject to appeal until the final decision in the lawsuit, including the decision on Heads Up’s breach of contract claims.  Eventually, Heads Up was involved in two appeals relating to the enforceability of its mechanic’s lien.  Almost six years after filing its lien, Heads Up lost both appeals and has no security for its claim.

This case illustrates the practical problems with trying to enforce a defective mechanic’s lien.  The filing of a defective mechanic’s lien can lead to increased legal costs fighting over the validity of the lien instead of focusing on paying the debt owed to the contractor.  Unfortunately, a contractor cannot recover its attorney’s fees as part of its lien claim even if it prevails on these issues, but those legal fees can become significant if the owner or the mortgage lender contest the lien.

To protect their rights for payment, contractors need to prepare accurate and enforceable mechanic’s liens.  A valid lien provides security for the claim and puts the mechanic’s lien claimant in a better negotiating position than other contractors.  A defective lien, however, can result in delays and additional legal costs.  All contractors should consult with an attorney experienced in preparing and enforcing mechanic’s liens to

Please click here to go back to Part 1: Technical Risks.

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