Virtually all states provide that contractors, laborers, material suppliers, equipment lessors, architects and other design professionals can protect their investment by recording a claim of lien for unpaid wages, materials or services. Notwithstanding these rights, sub-trades must of course comply with state specific guidelines in order to have and maintain a valid lien claim. However, assuming that a lien was fully perfected, it will attach to the real property where the work was performed or materials furnished, thereby preventing the owner from selling or refinancing his property. Hence, it is a very valuable tool for those parties in the construction trades.
At some time, however, most lien claims are resolved and either paid in full or a negotiated amount is accepted by the lien claimant and paid by the property owner or general contractor. At that juncture, the owner will demand that the lien claim be released so that he has clear title to the real property. Generally, this is accomplished by recording a satisfaction of lien in the recorder’s office where the lien claim was initially recorded. Failure to record a release after receipt of payment and demand by the owner could subject the lien claimant to damages for slander of title.
Often, new clients ask if lien claims are really that effective in terms of protecting receivables. Noting that Levy – von Beck & Associates has been actively engaged in the field of construction law since 1984, it is a rather easy sell. Historically, our firm sends approximately 850 to 1,350 preliminary notices out each month. However, we typically record only 10 to 15 liens each month and of those, only a dozen or so are actually foreclosed in a one-year period. From our perspective, there is no better tool available to contractors and suppliers in terms of protecting one’s receivables.
If your company would like additional information about this topic, please feel free to contact us at your convenience.