This article, written by attorney Bryanna Devonshire, was originally published by the NHBR and can be found here.
In the dynamic and bustling construction industry of New Hampshire, contractors play a crucial role in bringing projects to fruition. Amidst the excitement of new projects, however, contractors also face myriad challenges, from project management complexities to financial uncertainties. Contractors must be constantly aware of project finances and navigate potential risks to ensure they receive rightful compensation for their labor and materials.
One powerful legal tool available to contractors to protect their interests and ensure timely payment for their work is the mechanic’s lien. Understanding the mechanic’s lien process and leveraging it effectively can significantly enhance contractors’ ability to secure rightful compensation and mitigate financial risks.
What is a mechanic’s lien?
A mechanic’s lien is an attachment placed on a property by contractors, subcontractors, design professionals, or suppliers who have not been paid for labor, materials, or services provided for a construction project. It serves as a form of security interest that ensures payment by creating a cloud on the property title until the debt is satisfied. This protection is often vital for contractors who may otherwise face delays or difficulties in obtaining compensation.
How can mechanic’s liens protect contractors?
Mechanic’s liens provide several key benefits to contractors:
Payment assurance: By filing a mechanic’s lien, contractors establish a legal claim against the property where they performed work or supplied materials. This gives them leverage to negotiate and ensures they receive payment for their contributions to the project.
Priority of payment: In the event of nonpayment, mechanic’s liens often take priority over other claims or interests on the property, such as construction mortgages or other liens. This enhances the likelihood of recovery in case of financial disputes.
Legal recourse: Contractors can enforce a mechanic’s lien through legal proceedings, which may include foreclosure on the property to satisfy the unpaid debt. This provides a powerful mechanism for contractors to compel payment from property owners or general contractors who fail to meet their financial obligations.
What steps should I take to use mechanic’s liens effectively?
Understand the statutory requirements: Mechanic’s lien laws vary by state, including deadlines for filing, notice requirements, and specific procedures. In New Hampshire, mechanic’s liens are governed by NH RSA § 447. Contractors in New Hampshire would be wise to familiarize themselves with this statute as following the requirements in NH RSA § 447 is essential to securing a mechanic’s lien. Mechanic’s liens are often denied or defeated if the procedural requirements of this statute have not been met.
Document everything: Maintain meticulous records of all transactions, contracts, invoices and communications related to the project. Often, the question of whether a contractor is entitled to a mechanic’s lien depends on the last day the contractor worked on the property. Therefore, it is important for contractors to keep track of what work was done and when. Clear documentation strengthens the contractor’s position when asserting lien rights.
Serve notice: NH RSA § 447 requires that subcontractors give notice to property owners that they will claim a mechanic’s lien before the subcontractor even provides the labor or materials for which the mechanic’s lien is claimed. No such notice is required for general contractors.
File timely: File the mechanic’s lien within 120 days of the last day that work was performed or materials were supplied for the project. In order to perfect a mechanic’s lien, a contractor must first file a Complaint and Motion for Ex Parte Attachment on a Mechanic’s Lien with the appropriate court. After the court grants the motion, the court will issue a writ of attachment that must be served on the registry of deeds where the property is located.
Monitor payment: Stay proactive in monitoring payment schedules and addressing any delays or discrepancies promptly. Early intervention can prevent payment issues from escalating into more significant financial challenges. Additionally, because the right to a mechanic’s lien expires after 120 days, contractors do not have the luxury of taking a “wait and see” approach.
In conclusion, mechanic’s liens serve as a critical safeguard for contractors in New Hampshire, offering a legal mechanism to secure payment for their labor, materials, and services on construction projects. By understanding the mechanic’s lien process, complying with state requirements, and maintaining thorough documentation, contractors can protect their financial interests and maintain business stability in a competitive industry landscape.
As contractors navigate the complexities of project engagements and payment disputes, leveraging mechanic’s liens effectively can strengthen their positions and ensure fair compensation for their contributions on construction projects. There are many nuances that must be followed to successfully perfect a mechanic’s lien, and it is strongly recommended that contractors seek the assistance of an experienced attorney to help them with this process.