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#5:  Mechanic's Liens and the Notice of Intent

5/20/2014

1 Comment

 
New Hampshire law gives unpaid contractors, material suppliers and others involved in the construction process a lien on any private property improved, to secure the amount they are owed.  General contractors (those whose contracts are directly with the owner of the property) can obtain a mechanic’s lien without any advance notice to the owner, simply by marching into court any time within 120 days of the last date of work and getting a court-approved attachment of the property.  Subcontractors and others who do not have direct contracts with the owner, however, must give advance written notice of their intent to “lien the job” if they want to protect the full amount owed to them.

The rationale for this is easy to see.  Owners presumably know what they owe their general contractors, so they don’t need any advance notice in order to protect themselves.  But they may not know who all of the subs and suppliers are, or whether they have all been paid – even if they are smart enough to ask their GC for subcontractor and supplier lien waivers prior to cutting checks.  So, to protect the owner against having to pay twice for the same work (once to the general contractor and again to an unpaid sub or supplier), New Hampshire law provides that such lower-tier parties must give the owner a written “Notice of Intent to Lien” – or risk losing their liens, which will be capped by the amount that the owner still owes (or will owe) the general contractor on the date the notice of intent is received. 

This notice can be given before work starts, or during construction, or even after the construction is finished (although obviously not later than 120-days after the last date of the lien claimant’s work – the legal deadline for obtaining a lien).  But if the sub or supplier waits until after the GC has been fully paid the agreed contract price (or most of it), his notice will come too late to protect himself.  So why is it that subs and suppliers rarely take the ten minutes required to send owners a simple “Hi, I’m here, you need to worry about me” notice, alerting the owner up front of their intent to file a lien for any unpaid amounts?  Laziness?  Blind trust?  Not knowing who the real owner is?  These are all possible explanations, but I’ve found the most common reason is this:  For fear of upsetting the GC.


Here’s the thought process:  (1) “I want to continue to sell or work for this GC in the future.”  (2)  “If I notify the Owner of my intent to lien before my payment is due, my GC will find out and take it as an insult.”  (3)  “I’ll never do another job for this GC.”  Sub-subs go through a similar thought process with their subs.  So do supply houses (although this is less likely the larger the supply house is.)  Is it a valid concern?  Perhaps.  Can it be lessened?  Definitely!

The Notice of Intent has no prescribed form; anything that alerts the Owner to your existence as a potential lienor is sufficient.  You can soften it by making it appear –and actually BE – a matter of routine.  I recommend sending a benign statement after you start performance, one which puts the owner (and thus the GC) at ease.  You might try “Dear [owner]:  We have been contracted by [name of GC or sub] to furnish [describe the labor and/or materials] to your construction project, and have [now started/just completed/substantially completed] our performance.  While we anticipate no payment issues with our customer, it is our policy to alert owners up front that a mechanic’s lien may be placed on their property if, for some reason, that flow of funds is interrupted and we are not paid for our performance.  In that unlikely event, we will be placing a lien on your property.  You can minimize that risk by ensuring that your general contractor is timely paid for work performed, and by asking your general contractor for a lien waiver from us, which we will be happy to sign.” 

No GC should be offended by that.

1 Comment
Iris Smith link
12/8/2022 01:15:55 am

Thank you for stating that material suppliers, such as concrete and lumber providers, are allowed to file mechanic's liens if they are not paid. My father operates a professional design service firm for retailers. I'll advise him to make a lien claim on real property by contacting the mechanical liens specialist.

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    Frank Spinella

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