Can I File a Mechanic’s Lien If I’m Still Furnishing Materials or Labor?
Construction projects can take a long time to complete; Rome wasn’t built in a day. Getting paid in the construction industry takes just as long – longer maybe. So, it’s not surprising when a construction company comes to us and wants to file a mechanic’s lien even though they are actively furnishing materials and/or labor to a project. Clients frequently ask, “Can I file a mechanic’s lien if I’m still furnishing to the project?” I wish the answer were as simple as “yes” or “no.”
OK, So Can I File a Lien if I’m Still Furnishing?
Like how I dodged that question? The truth is, whether a lien can be filed prior to your last furnishing may depend on varying factors, but primarily on statute. For example, in New York, statute indicates the lien may be filed “at any time during the progress of work” which implies you could still be furnishing when you file your lien.
N.Y. LIE Article 1, Section 10 (1.) Notice of lien may be filed at any time during the progress of the work and the furnishing of the materials, or, within eight months after the completion of the contract, or the final performance of the work, or the final furnishing of the materials, dating from the last item of work performed or materials furnished;
However, other states like California, explicitly state the lien should be filed AFTER furnishing has been completed.
- A claimant other than a direct contractor may not enforce a lien unless the claimant records a claim of lien within the following times:
(a) After the claimant ceases to provide work.
(b) Before the earlier of the following times:
(1) Ninety days after completion of the work of improvement.
(2) Thirty days after the owner records a notice of completion or cessation.
One California Subcontractor Learned the Hard Way
I was just reading Precision Framing Systems Inc. v. Luzuriaga, Cal: Court of Appeal, 4th Appellate Dist., 2nd Div. 2019. In this case, the subcontractor filed its lien while it was still furnishing to the project. When the subcontractor filed suit to enforce its lien, the project owner argued the lien was filed too soon. The circuit court agreed with the project owner, and subsequently the appeals court also sided with the owner. California statute is clear, you must complete furnishing prior to filing the lien.
The subcontractor argued that when it filed its lien, it didn’t know it would have to provide additional materials/labor. The additional furnishing was to fix an issue, not work within the terms of the contract. If it was work outside of the contract, wouldn’t that mean the furnishings within the contract had already been completed, making the lien valid? In reviewing the case further, I came across a recent article, by attorney Garrett Murai, in which he explained the Court of Appeals decision:
“The Court of Appeals, noting that [the] subcontract required that [subcontractor] supply and install ‘trusses . . . necessary to complete the . . . project,’ held that the repairs performed in February 2014 were part of [subcontractor’s] ‘work’ and that because [subcontractor] had recorded its mechanics lien in January 2014 it had done so prematurely.
The Court of Appeals also explained that the fact that the general contractor deemed [subcontractor’s] work to be complete is irrelevant, since the scope of [subcontractor’s] work was established by its contract not by ‘the factually unsupported legal opinion of two witnesses.’
Finally, explained the Court of Appeal, while ‘it may seem unfair to hold that [subcontractor] recorded its claim prematurely’ when ‘it did not know that it had any work left to do’ that the Court had ‘not found any case law suggesting that a claimant’s subjective knowledge or belief as to whether it has ceased to provide work is relevant’ and further that ‘nothing in the Mechanic’s Lien law prohibited [subcontractor] from recording its claim again after the repairs were prepared.'”
Best Practice – Best to Finish Furnishing Before Filing the Lien
As a best practice, you should complete furnishing before filing the mechanic’s lien. Bear in mind, this is a general rule of thumb; there may be extenuating circumstances that would permit or necessitate the filing of a lien prior to finishing furnishing. When in doubt, seek a legal opinion, carefully review statute, and carefully review your contract.
How many times have we said “… when filing a UCC, always list the individual’s name as it appears on the unexpired driver’s license …” Oodles! Because it’s true; it’s right there in UCC Article 9! It’s true, until a court case drops and mucks it all up.
- September 17: UCC Filing in the Foodservice, Hospitality, and Beverage Industries
- September 24: Understanding Lien Waivers
- October 8: The Basics of the UCC Process
- October 22: The Basics of the Lien and Bond Claim Process
- October 31: Securing Mechanic’s Lien Rights in Notice of Commencement States
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