Managing Lien Deadline Dates in Uncertain Times

The entire world has been turned upside down due to the outbreak of the coronavirus. It's impacted companies large and small and individuals rich and not so well off. Friends and family members are getting sick from the pandemic and the death toll is rising. And this is just over the last couple days. Experts predict the outbreak and economy could worsen before it starts getting better despite the "flatten the curve" actions laid out by government officials, health care leaders and businesses.

In the workforce, some businesses have been considered essential while others have not, and some work is essential depending on the location. Construction is one of those industries that has been on both sides of the fence—essential in one location and not another, or completely shut down. This has often left those in the field perplexed, especially when it comes time to file and send documents while working on a project.

"In times of economic uncertainty, the decision to file a mechanic's lien must be made swiftly," said Chris Ring of NACM's Secured Transaction Services in his recent webinar on the coronavirus and how it will impact construction. "Just as critical is knowing the date the lien needs to filed."

Deadlines are pretty straight forward in some states—serve the lien within X amount of days from last furnishing—however, in some states it's not as clear cut. "You have to understand the mitigating factors that determine the deadline," Ring added. One of the many construction challenges for lien claimants is accurately calculating deadline dates. This is due to the fact that money on the project could be drying up quickly depending on the type of project and its location. Several examples of this are in the most-impacted coronavirus states.

On California private projects, determining the lien deadline depends on which documents have been filed or not by the owner. Claimants have 90 days from completion of the entire project; however, if the owner files a notice of completion or a notice of cessation, the original contractor now has only 60 days, while other claimants have 30 days after the recording of the owner's documents.

Other states, such as Washington, are hybrid lien states, i.e., full price for commercial projects and unpaid balance for residential projects. In full price states, owners can't use the defense that they have already paid the general contractor, and as long as everything is done accurately, the owner can be forced to pay twice. For unpaid balance states, owners can use that defense to prove they paid the general contractor prior to the lien being filed.

New York and Massachusetts are also under the microscope due to the effects of the coronavirus, specifically in New York City and Boston. The long deadline dates in New York paired with the fact it's an unpaid balance state means, "It's going to be very unlikely that within that timeframe the owner hasn't already paid the general contractor for work," Ring said.

During this uncertain time, the best advice is to not wait to submit liens—don't wait until the last minute even if there isn't a global pandemic. "Submit liens for recording a minimum of three weeks prior to deadline date," Ring suggested.

-Michael Miller, managing editor