This depends upon the state, but in many cases you cannot.  Remember there is a distinct difference between pre-judgment interest and finance charges.  Pre-judgment interest is automatic and need not be specified in the contract–usually in the neighborhood of 10% per annum.  Finance charges are usually in the neighborhood of 2% per month or more and are stated in the contract.  The whole idea of mechanic’s lien is it applies only to the reasonable value of labor and materials conferred on the project, and obviously these items have nothing to do with a finance charge.

            But many contracts have such charges.  It might be perfectly legitimate to ask for and receive them, but when it comes to preparing your mechanic’s lien, you probably will not receive it. 

            So what do you do when preparing the mechanic’s lien?  One option is to state the finance charge in the alternative as follows: “The amount of the mechanics lien is $14,562.00, plus prejudgment interest at 10% per annum, from and after May 5, 2008.  In the discretion of the court, a finance charge of 2% per month may be awarded as provided in the contract, in lieu of the simple interest.”   In other words, under no circumstances may you receive the interest and the finance charge. 

            Note also that some states have special consumer statutes which forbid use of finance charges that do not have a connection to actual damages. This is usually part of the overall legislation or case law which, for example, forbids unreasonable late charges.  This is a fancy way of saying that you might be limited to the simple interest. 

            NationalLienLaw.com is not aware of any state which would allow direct or consequential damages to be inserted into a mechanic’s lien.  The reason is that such claims are strictly limited to the labor, materials, and equipment conferred to the project which results in some form of permanent improvement.  Your damages, over and above the amount owed on the contract and change orders, would be outside this scope.

            Here are some examples of damages which could not be included:

·        Loss of profits on other jobs. As a result of not being paid $10,000, you were unable to use that money to advance labor and materials for another large job you were just beginning.  You had to turn that job down and lost a profit.

·        Lack of productivity.  Assume there have been so many changes and miscommunications on the job,  that you had to start, stop, mobilize, demobilize, expand, shrink, fabricate, and re-fabricate, and change your work force and productivity. You have lost countless hours and had to pay your employees out of pocket. This is normally not included in the mechanic’s lien.

·        Delay damages.  You have been delayed in the start of the project as well as during the course of construction. 

·        Extended overhead. The architect has made so many changes to that you have been on the job much longer than expected and have had to carry a substantial overhead. 

It is important to remember that although these items may not be included in your lien, you can include them in a lawsuit or arbitration for breach of contract and consequential damages against the person you have your contract with. 

            So when is a project completed?  In most cases, it is when the last work is performed under the base contract with any authorized change orders.  Parenthetically, most states do not determine this date based on a certificate of occupancy or finalization through the building department.  This is because finish items, such as floor covering, painting, etc., are not included in the building permit, but are part of the contract. 

            So if the time begins to run upon completion of the overall project, it is when the last person or subcontractor “closes the door and turns out the lights”.  In other words, when the last person did any type of work on the project,  even though it is not your crew. This is typically determined by asking your crew members if they remember seeing anyone else work on the project after you performed your work.  Or driving by the project and seeing if there’s still work being done.

            If the time starts running after you finish your portion, it is similar in that you look to see  when the last man hour or delivery of materials occurred.

            Furthermore, in almost all states, warranty, call-back, or punch list items do not extend the time to record your lien.  The best way to illustrate this is by an example.  Assuming you have constructed a ten story office building and part of the contract involves installation of the soap dispensers in the men’s rooms.  Though this seems to be minor, any work on the base contract will extend the lien.  So, going back and installing those soap dispensers will give you more time.  But if you’re merely going back and replacing some of the lock sets that are allegedly defective in the same men’s rooms, this would be a callback or warranty provision and would not extend the time.  In other words, re-doing what you have already done does not extend the time. 

            Remember also that judges are not going to “stick their necks out” and allow your situation to be a test case. They are going to treat you like everybody else and expect that you comply with the letter of law.  The strict requirements are usually applicable to:

·        Filing or serving your pre-lien, lien, or lawsuit to foreclose within a set period of time. Literally, if you miss it by one day, there is no forgiveness.

·        The failure to serve a preliminary notice.

·        The failure to abide by the statutory requirements as to the exact wording of your notice or lien. Many states have specific requirements and you must use precise wording. Be very careful about web sites that have generic forms because they are almost always invalid.

Let us give you an example.  You are owed the balance of $5,000 on your contract and the homeowner, on three distinct days, in front of witnesses, reaffirms they have no dispute as to your bill and are only getting the financing together to pay you. There’s also an e-mail and a separate letter which confirms your good work and that they have every intention of paying the exact sum. Further, five days before the lien expiration date, they inform you they are in the process of receiving the funding through a private loan. You wait patiently taking them for their word. Unfortunately, the five days passes and after you speak with an attorney, you merely filed a lien the next day.

Your first reaction is if we ever end up in court, the judge will readily see the amount was agreed upon and award the lien. No one is perfect and what difference does one or two days make. Unfortunately, there is no known exception, even if based upon fraud, to these requirements.

Note that the same rules apply to any of the notices, including pre-lien notices.  So, the popular folklore that lawyers can always argue that their way out and come up with technicalities, does not apply to mechanic’s lien statutes

Enough said.

            This depends upon the state.  Unfortunately, many states will not allow you to include what has been paid during the course of construction, in preparing the lien, or later if you have to bring arbitration or court proceeding.  The reason is that a mechanic’s lien is only for the amount of the labor and materials conferred upon the project:  which has resulted in some kind of permanent improvement.  Logically, attorneys’ fees have nothing to do with constructing that improvement.

            On the other hand, a lien is seldom rendered invalid by inserting such a request.  In most cases, it will simply be stripped off the record by the court.  There certainly are instances in which mechanic’s lien are found to be void because of intentionally misstating amounts owed, but this would not be in this instance. 

            One way to protect your rights and at the same time not overstate the lien is to have a provision as follows: “The amount of the mechanics lien is $17,430.00, plus prejudgment interest at the rate of 10% per annum from an after July 15, 2008, and to the extent allowable under state law; reasonable attorney’s fees and court or arbitration costs that may be ordered by the court. “

            On the other hand, there are some states which specifically by statute allow you to receive attorney’s fees as the prevailing party in any lawsuit to foreclose lien.  Is a good idea to consult with your attorney to determine if this is the case. 

            It is very common for a construction contract to include a provision for binding arbitration.  This means that in any enforcement procedures or for breach of contract for damages, you must seek redress through an arbitrator and not your local courthouse.  Frankly, this is a good idea, because traditionally arbitration is a better method to resolve disputes because the arbitrator typically has vastly more experience than a judge.  For example, arbitrators are typically experienced construction attorneys, as well as engineers or architects.

            But we also know the lien must be perfected through an action to enforce the mechanic’s lien or it will expire.  So what do you do if there is an arbitration provision?  Simple.  You bring a lawsuit in local court through the filing of a summons and complaint.  You then prepare a short petition with an order for the judge to sign indicating the proceedings will be stayed pending the outcome of the arbitration, thereby preserving the statute of limitations as to timely enforcement of the mechanic’s lien.  You then go on your merry way through the arbitration proceeding and when you have finished, simply confirm the arbitration award as a court judgment. 

©2008 NationalLienLaw.com. All rights reserved. (925) 899-8449. Email–info@NationalLienLaw.com. Revised  12/08