Sometimes Substantial Compliance is Enough

Turns Out, Sometimes Substantial Compliance with Mechanic’s Lien Law is Enough

At NCS, we constantly stress the importance of complying with each state’s mechanic’s lien and bond claim laws. In fact, we recommend conservative adherence to the statutes, as it is generally better to be early as opposed to late (generally – there are ALWAYS exceptions).

“Wait, what?”

For example, if a mechanic’s lien deadline is determined by the date of completion, NCS would recommend you calculate your lien deadline based on your last furnishing date, because you may not know the completion date – and if you are relying on a date you don’t know… well, hopefully I don’t have to complete that thought.

While it is imperative to follow a state’s laws, I was recently reminded that sometimes, “substantial compliance” is enough to protect your rights.

“I’m sorry, what? Substantial compliance?”

Yes, as I have previously mentioned, in the land of mechanic’s liens, the gray area is a minimum of 51 shades (get it, 51, like the states + DC? No, no, not the book).

Mistakes happen – best efforts are made, and an Indiana appeals court recently decided that best efforts were enough to recover through the mechanic’s lien process.

Indiana: Creditor’s Name on the Prelien Notice didn’t Match the Creditor’s Name on the Lien

In Von Tobel Corp. v. Chi-Tec Construction & Remodeling, Von Tobel Corp. supplied materials to Chi-Tec Construction & Remodeling. Von Tobel Corp. served a prelien notice and identified themselves as “Von Tobel Home Center, Inc.” then, when Von Tobel Corp remained unpaid, they filed a lien and identified themselves as “Von Tobel Corporation

Chi-Tec Construction claimed that Von Tobel Corp.’s lien was invalid, because “Von Tobel Corp.” did not serve a prelien notice – “Von Tobel Home Center, Inc.” served a prelien notice. The appeals court sided with Von Tobel Corp. and granted the validity of their lien, because Chi-Tec was arguing based on a “hypertechnicality”.

From the Appeals Decision

“(We) reject[ed] the idea that our entire mechanics’ lien statute must be strictly construed with such hypertechnicality so as to frustrate the remedial purpose of the legislation…

The perfection and enforcement provisions of the statute should be fairly and reasonably construed and applied so as to afford materialmen and laborers the security intended upon substantial compliance with statutory requirements, keeping in mind the need to afford reasonable protection to the rights of other parties who may have acquired an interest in the party…

Here, the degree of non-compliance with the letter of the statute is minimal…

The variance between the name set out in the Pre-lien notice and that contained in the Lien Notice was minimal, did not undermine the statutory policy concerns regarding notice, and did not cause prejudice to the property owner or any third party.”

Ultimately, the owner knew that “Von Tobel Home Center, Inc.” and “Von Tobel Corporation” was the one and the same, and that “Von Tobel et al” provided materials for the improvement to their property, which means, Von Tobel et al should have been paid for their services.

Now, I must say, even though the appeals court sided with the creditor, the creditor could have eliminated the extra time & money of the appeal if they had correctly identified themselves in the notice from the start. Nonetheless, identifying themselves incorrectly was not a deal breaker – kudos!

NCS recommends conservative adherence to the statutes – what one judge in Indiana rules may be entirely different than a judge in another state!

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