If you’ve ever been a contractor who’s working on a big project, or even a person looking into get into the business, you need to know about two of the most prominent protections out there for contractors. That’s a Mechanic’s Lien. However, you need to know that most states require you to give some notice that should you not get paid, you’re going to file suit to protect yourself and get paid for the hard work you’ve been putting into it.
There are two main types of notice, one being a preliminary lien notice, and the other being a notice of intent. In this guide we’ll briefly explain each one and help you know when each is required, and which one you need to file, as it depends on numerous different factors.
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What is a Preliminary Notice of Lien?
While the two are commonly confused, the preliminary notice is required in almost every single U.S. state and it is to help you to let your customers know that in the event of nonpayment, that you’re going to file a mechanic’s lien. This is needed to protect your rights, and if you don’t know whether or not you need to send one in order to file that lien in the future, then you can greatly benefit by sending one, as it also would show in court cases that you took every necessary measure to make sure that your client was informed.
It is meant to keep your project’s property owner as well as any other general contractor, or other witnesses involved educated so they know what’s going on and help build a better relationship.
A Notice of Lien
A notice of lien is more like the demand letter for a construction company or contractor. It’s actually more like a second step, or a second writ of communication, or a warning before you file a mechanic’s lien claim. They have more weight bearing properties on the debtor, but at the same time it shows that you’re trying to get their attention to pay you as a contractor.
While you don’t have to actually file a notice of lien in every state, it’s also a good idea to do so, but there are some states that actually require one. If you’re working on a public works construction, federal, or state project you do not have to file a NOI.
Conclusion: So, Which One Do I Need?
The truth is, it’s a good practice to utilize both of them, and you actually have to in approximately 9 states in America. Therefore, you’ll want to make sure that all of your grounds are completely covered. If you should fail to file these required documents (or even show proof of them), then you can actually have your rights to file a mechanic’s lien denied in the event of nonpayment, which can put a lot of hurt on you.
Also, be aware that in some states where it is required, you can not only lose your rights to file a claim, but even be fined for not filing all of the necessary forms that you should have to let your customer know that if you don’t pay that you will file a claim.