Why You Need to Collect Relevant and Accurate Information for a Mechanic and Materialmen’s Lien

If you find yourself in a situation where you need to file a mechanic and materialmen’s lien to collect money you’re owed, you’ll need to have documented relevant information about the project. Having critical information at hand makes it quick and easy to navigate the lien process successfully. However, if business owners do not collect the necessary information while the project is ongoing, they’ll struggle to recall the information they need accurately.

Having a mechanic lien system in place for collecting all of the information that you may need to file a lien, for every project your company works on, is essential. This article shares a simple procedure for collecting project information, so you never have to risk relying on your blurry memory.

Consequences of NOT collecting relevant information

With the proper information, you can easily and successfully navigate through the lien process. Without it, you’re simply gambling. The consequences of gambling and using incorrect information could be having to defend yourself against a slander of title lawsuit from the landowner, paying your own attorney fees, and paying the landowner’s attorney fees. On top of that, you ultimately will not collect the money you were owed for your work on the project.

Benefits of collecting the information during a project

Implementing a system for collecting information for every project, every time will allow you to do the following: 

• Evaluate the nature of the construction project so you can determine what documents will be necessary, i.e., original contractor lien, subcontractor lien, commercial or residential pre-lien notices, etc.

• Identify, calculate, and calendar all mandatory time limits

• Determine the correct legal description

• Identify all necessary parties to serve the lien documents and foreclosure action, if necessary

• Prepare accurate lien documents and foreclosure documents, if necessary

What information is “relevant?”

The first step of developing a lien information collection system is to determine what information is “relevant.” The most important information for preparing lien documents is: 

• Parties to the construction contract

• The landowner

• The work performed

• The legal description

• The amount owed

Creating a simple checklist is the best way to ensure that you consistently collect all of the relevant information for every project. A checklist removes any guesswork and standardizes the process so that you collect the same, important information every time, no matter which employee performs the task. Ideally, you’ll have just one team member responsible for collecting the information for every project, but in the event that the person is unavailable, the standardized checklist makes it possible for someone else can keep the system functioning.

Accuracy is key 

Collecting relevant information is important, but it also needs to be accurate.

For example, you need to have a correct legal description. If the description is incorrect and you place the lien against the wrong property, the lien will be invalid, and you will need to spend money to clear the title of the other landowner.

It’s also essential that you record accurate information about the party you contracted with. Did you contract with the landowner, a tenant, or a general contractor? Each impacts your lien rights differently.

It takes diligent training and monitoring of the information to ensure that it’s accurate for each project, which is why it’s best to have a single team member take responsibility for gathering the information for all projects. If you’re ever in doubt about the accuracy of the information you’re collecting, it’s wise to involve your legal counsel to review it. 

When should you collect the information? 

Many contractors incorrectly assume that they don’t need to worry about collecting the relevant, accurate information until a collections problem arises. However, waiting until the last second presents opportunities to rush the process, which often leads to mistakes and missed deadlines.

If you miss a mandatory deadline, you miss the opportunity to use a lien to collect your money.

Also, the contract payment schedule may extend several months past the time when you completed the work. At that point, your memory about the details will probably be fuzzy, and collecting accurate information will be much more difficult.

Implement a simple system

When you have a short, simple, standardized system for collecting relevant, accurate information for every project, then filing a lien will be efficient and easy. Below is a simple, free checklist that I created for my clients. They have used this checklist to successfully file liens for years.

If you have questions about how to develop a system for filing mechanic and materialmen’s liens or would like legal counsel to review the information you currently collect, please get in touch.