Why should you go through the trouble of perfecting a
lien? There are several reasons that
going through the lien claim process may be beneficial to you and your
business.
As will be discussed in later blog posts, in most
situations, contractors must send out notices of their unpaid claims very early
on in the process. This is helpful for
several reasons. For one, the notices
must be sent within a few months after the labor and/or materials were provided
to the project, and, consequently, you aren’t allowing your AR to become
seriously delinquent. Additionally, the
notices serve as a reminder that your invoice has not been paid, and sometimes
a reminder may be all it takes. Some
notices must also be sent to the Owner of the property. Once the owner becomes aware that you as a
subcontractor are not being paid by the General Contractor, the Owner may
intervene with the General Contractor on your behalf or retain funds from the
General Contractor for your benefit.
Furthermore, timely sending out the proper notices demonstrates that you
understand the lien process and are a competent and professionally run business
that will have no problem perfecting and enforcing your lien rights if
necessary.
If sending the required notices does not result in payment,
you have set yourself up to claim a lien on the property. Perfecting a lien claim is beneficial from a
legal and negotiation standpoint. Legally,
if you have followed the proper procedure and perfected your lien, you can file
suit to foreclose on the lien if necessary.
From a negotiation standpoint, you have more power when
you’ve perfected a lien. If you have
perfected your lien, it will be reflected in the real property records and will
put third parties on notice. This can be
helpful in several situations. For
example, if the Owner of the property would like to refinance a loan on the
property or sell the property to a third party, most lenders and third parties
will require a release of lien from you before proceeding with the
transaction. This could mean that the
Owner or the third party buyer may offer to pay you all or some portion of your
claim to release the lien. For new
construction, continued financing may be contingent upon keeping the property
lien free, and if your lien claim will make financing more difficult, you may
be more likely to get paid. Additionally,
many property Owners will not release retainage until the General Contractor
can provide lien releases and/or affidavits that all bills have been paid,
which can motivate the General Contractor to pay Subcontractors.
By SarahF. Berry, Attorney
If you are interested in attending a lien and bond claim
workshop please contact Sarah Berry for more information. Sarah@LPVLaw.com or (512) 472-2300.
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