When securing your mechanic’s lien rights, it’s not enough to file your mechanic’s lien by the statutory deadline. It is also important to know whether you are filing a mechanic’s lien in a state where the mechanic’s lien is generally limited to the unpaid portion of the contract, also known as an Unpaid Balance Lien State.
We asked Construction Credit Professionals “How many states are Unpaid Balance Lien States?” and we provided the following possible answers to choose from:
- “10 or less” – 17%
- “11-25” – 22%
- “More than 25” – 22%
- “I have no idea!” – 37%
- “This question does not pertain to my business” – 2%
78% of the participants answered the question incorrectly, with the correct answer being “11-25” (22 states & the District of Columbia).
The Lesson: if an account remains unpaid, it is in your best interest to proceed with a mechanic’s lien sooner rather than later, especially if you are unsure about a particular state’s guidelines.
Unpaid balance lien states generally limit the enforceability of the mechanic’s lien to the unpaid portion of the contract at the time the lien is filed. Even if your lien was recorded timely, it may be unenforceable if the property owner paid the general contractor in full prior to the lien recording.
If you’d like to learn more, check out “NCS Extra Credit Series 12 – The Difference Between Unpaid Balance vs. Full Balance Lien States” or don’t hesitate to refer to The National Lien Digest for further information about mechanic’s lien & bond claim statutes throughout the U.S. and Canada.