Filing a Mechanic’s Lien on a Wind Farm? Keep These 7 Things in Mind.
Supplying materials or labor to a wind farm project? Securing mechanic’s lien rights is vital to protect your receivable. Make sure you always serve preliminary notices, carefully track your deadlines, and if you need to proceed with a mechanic’s lien on a wind farm, be sure to keep these 7 things in mind.
#1: Correctly Identify the Property Parcel(s)
Wind farms cover large portions of land, frequently occupying thousands of acres, across numerous parcels throughout multiple cities and counties. According to one report, the Roscoe Wind Farm in Texas is sprawled across four counties and over 84,000 acres.
Because of their massive size, it is often difficult to identify the exact parcel(s) where materials were incorporated, or labor was provided. Whenever possible, try and obtain specific project location information before you begin furnishing. Information that may help may include the project address, parcel ID numbers, a GIS map of the area, or even GPS coordinates.
#2: Correctly Identify the Property Owner(s)
In addition to identifying the correct parcel of land, you need to take the time to correctly identify the property owners. Often, there are just as many landowners as there are parcels.
Generally, mechanic’s lien laws dictate the property owner should be served with a copy of the lien. If you furnished to multiple parcels, you need to be sure you serve the owner for each parcel.
When you serve your preliminary notice, take the time to identify each owner. If you have the location information, you can usually obtain property owner information from the county assessor.
#3: Multiple Liens May Be Required
Occasionally these sprawling farms may be under sole ownership (i.e., one person or company owns every parcel of land), but it’s unlikely this would be the norm.
If your materials were incorporated in multiple parcels, you may need to file a lien on each parcel. For example, if you furnished to 8 different parcels, you may need to file 8 liens. It isn’t easy, some argue it’s a nuisance, but it may be a statutory requirement you need to comply with.
On the upside, there is also a chance one lien will cover you. How? There have been cases where courts have accepted one lien filed on multiple parcels, where the parcels had the same owner and were contiguous (i.e., touching one another). As a best practice, use an attorney local to the project, who has construction experience; their legal expertise is vital.
Multiple parcels, multiple property owners, multiple liens – you see where this is going, right?
#4: Title Work Could Be Expensive
It’s not rocket science, but title work costs may cause a bit of sticker shock.
Do the math:
Multiple Parcels X Multiple Owners = Multiple Title Reports
Multiple Title Reports = Expensive
One contractor reportedly filed 159 mechanic’s liens on the Chisholm View Wind Project.
If each of those mechanic’s liens required individual title work and the average cost of title work is $75 per parcel, simple math indicates that title work could cost $11,925.
#5: Preparation and Recording of Liens Will Take Time
Because of the extensive title work, research, and time it will take to properly parse and identify where you furnished, please understand it will take time to prepare the liens.
Don’t wait until the deadline to file the lien. Give yourself plenty of time to ensure all documentation is accurate. You don’t want to lose your security because you rushed and filed the lien against the wrong property.
#6: Be Aware of Easements
What is an easement? “An easement is the grant of a nonpossessory property interest that grants the easement holder permission to use another person’s land.” – Legal Information Institute
Let’s say there is a wind turbine on your property, an easement may be in place to allow the power company to access the wind turbine on your property. It’s your property, but the other party has the right to access a specific part of the property for a specific purpose.
There are several different types of easements, which we won’t go into here. Just know that you may encounter existing easements, which may lead to issues of lien priority.
(Speaking of easements and wind turbines, you may want to check out: Are Lien Rights Available on Wind Turbines?)
#7: The Lien May Be Limited to the Leasehold Interest
A leasehold interest is real property held by a lessee under lease. When liening a tenant improvement, the statutes vary as to whether a lien would be available against the property, the leasehold interest of the tenant, or both.
Often, energy companies will enter into lease agreements with the landowners. The landowner continues to own the real property and the energy company owns the equipment and the output generated.
If there are lease agreements in place, you will need to determine who is liable for the improvements to the project: the fee owner or the lessee.
Take Your Time, Be Thorough, and Protect your Lien Rights
It takes multiple contractors, subcontractors & material suppliers to successfully build one energy farm, which means there are multiple opportunities for payment issues. Supply chain issues, special fabrication, change orders, construction defects, and a company’s low liquidity, are common factors contributing to slow payment or no payment. Proactively securing mechanic’s lien rights on a wind farm will help protect your company in the event of non-payment.