In the world of construction, the mechanics lien stands as a critical tool for contractors, subcontractors, and material suppliers seeking to protect their right to payment. However, when a project faces financial difficulties, and there’s a scramble for the limited funds available, understanding the nuances of mechanics lien priority becomes paramount.
In this article, we’ll delve into the intricate balance of lien rights among various stakeholders in a construction project and shed light on the priority rules that determine who gets paid first in non-payment disputes.
Contact CNS today to file a mechanics lien or call us at 800-366-5660.
The Hierarchy of Mechanics Lien Payment
Mechanics liens secure payment for labor or materials supplied to a project by attaching a legal claim to the property itself. When a project encounters financial hurdles and not everyone can be paid, the concept of lien priority determines the order in which creditors are compensated.
The general rule is that the priority of a mechanics lien is established based on the date of its filing. However, this can vary significantly from state to state, depending on jurisdictional and lien laws. As such, it’s important to know all mechanics lien deadlines and filing procedures for your state.
First in Time, First in Right
The “first in time, first in right” principle often governs lien priority, meaning that liens are prioritized according to the order in which they are filed. This means that a mechanics lien filed before other liens or encumbrances would typically have first rights. Because of this, if there are signs of non-payment issues, it may be wise to act swiftly in filing a lien to secure your place “in line” early. Additionally, sending a preliminary notice at the start of every project is critical for protecting your right to file a mechanics lien.
It’s also important to note that many states have specific statutes that may grant mechanics liens priority over previously filed liens or encumbrances, especially in the case of improvements made to the property.
Mechanics Liens vs. Other Liens, Mortgages, and Construction Loans
While mechanics liens are powerful tools, their priority over other types of liens, mortgages, or construction loans is not guaranteed. The specifics can vary widely depending on the state’s lien laws. For instance, a construction loan recorded before any work began on the property may have priority over a mechanics lien in some jurisdictions. On the other hand, in states with strong lien rights for contractors and material suppliers, a mechanics lien may take precedence over subsequent mortgages or other encumbrances.
Protecting Your Lien Rights With CNS
Mechanics liens are heavily relied on for protecting payment rights, but their effectiveness depends on understanding and adhering to the priority rules set forth by state lien laws. For contractors, subcontractors, and material suppliers, navigating these complexities is vital to ensuring their financial security on a project.
At CNS, we understand the challenges you face in securing your rightful payment. Our mechanics lien services for California, Arizona, Nevada, Oregon, and Washington are designed to simplify the process and offer expert guidance based on your state’s rules and regulations.
If you’re experiencing payment issues, contact us today to get a mechanics lien started.
Prefer to call? You can reach us at 800-366-5660.
Disclaimer: CNS is not an attorney, and if you need legal advice, please contact one.
