Perspectives
Pitfalls to Avoid when Filing a Lien
Filing a lien is a powerful tool for securing payment, especially in industries with complex credit transactions like construction, manufacturing, and large equipment leasing. However, errors during the lien filing process can invalidate your claim and put your payment at risk. Avoid these common pitfalls with our checklist to keep your lien rights intact.
- Understand Your State’s Deadlines: Lien laws vary by state, and missing deadlines can void your claim. Familiarize yourself with each state’s specific timeline for filing a Notice of Intent, the lien itself, and any additional notices.
- Send Preliminary Notices: Many states require you to send preliminary notices before filing a lien. Ensure you send these on time, or your lien claim may be invalid. Even when not required, a preliminary notice can remind customers of payment obligations.
- Files Against the Correct Party: Identify the property owner and parties in charge of payments. Filing against the wrong party can delay the process or invalidate your lien.
- Double-Check Contract Details and Amounts: Include accurate information in your lien claim, including contract amounts, dates, and any unauthorized changes. Overstating or misstating your claim amount can raise legal issues, jeopardizing your lien.
- Prepare Complete Documentation: Gather all supporting documentation, including contacts, change orders, and proof of delivered services or goods. Detailed records not only strengthen your lien but are crucial if your claim goes to court.
- Avoid DIY Errors-Seek Legal Help for Complex Filings: Liens in specialized industries may require additional steps or filings. Partnering with legal professionals who understand industry specific nuances ensure compliance and strengthen your lien rights.
By following this checklist, credit, and finance professionals can mitigate risks and increase the likelihood of successful lien filings, ultimately protecting your company’s cash flow and ensuring timely payments.