When a contractor or subcontractor wins a bid to improve a commercial property, they make plans to fulfill that contract to the best of their ability. However, during the work, a problem may arise in the financial well-being of the company that awarded the contract. When this happens, payment for services rendered may not be made on time to the contractor who cannot make payment to his subcontractors. The contractor can then file a mechanic’s lien on the property.
What is a Mechanic’s Lien?
A mechanic’s lien, otherwise known as a construction lien, is a guarantee of payment to contractors and other firms involved in the building or improvement of a structure. The lien ensures that if there is a liquidation, they will receive any money before other creditors after all taxes are paid. Since 2014, a subcontractor or material man can also file for this lien. Before then it was only the contractor with a direct relationship with the developer or construction firm who could do so. However, for a subcontractor or supplier to file a lien, they must follow a strict set of guidelines spelled out in the new legislation and they are precluded from doing so if the contractor has provided a payment bond.
Steps Necessary in Filing a Construction Lien
Once it is determined that no payment bond exists; the contractors, subcontractors, and material men have to file a claim of lien in the county where the building is located and it must be done within ninety days from the last day worked by the contractor on that property. A copy of the lien must then be sent within two business days of filing to the property owner. Then the filing company must commence a payment action within 180 days. A payment action can be a lawsuit or proof of claim in a bankruptcy proceeding.
Filing mechanic’s liens and meeting all the deadlines as well as commencing payment actions cannot be done without the help of a commercial litigation attorney. At Rushing & Guice we have served the Gulf Coast business community by fighting for the rights of our clients when a breach of contract occurs and can do the same for your company as well.