News & Insights

Indiana’s Mechanic Lien Requirements: A Primer
April 3, 2014
by Trevor Gasper

 

South Bend / Mishawaka, IN – Every contractor understands that completing a job in a timely and workmanlike manner is not always the end of the job.  All too often, good work goes unpaid.   A contractor can greatly increase the odds it will be paid by preparing and recording a proper mechanic’s lien against the property.

Indiana’s mechanic’s lien statutes, however, read like they were drafted with language over 100 years old.  That’s because, in large part, these statutes were drafted very long ago.  The statutes use words like “manufactory” and journeyman, and wareroom that are, for the most part, archaic and out of practice.  Over time, the statutes have been modified and re-stated in the code, but the archaic terms and language remain the same.  Navigating through the language in an attempt to ascertain exactly what is required can be a challenge. 

What is a mechanic’s lien?

Under Indiana law, a mechanic’s lien is nothing more than a claim for work performed, but not paid, relating to real estate.  Payment for almost all construction work, including supplying materials for people to do the work, can be the proper subject of a mechanic’s lien.  Once properly recorded, the mechanic’s lien becomes a lien of record against the real estate.  The mechanic’s lien ensures, at least for a time, that the real estate will not be sold or foreclosed upon without the involvement of the contractor claiming the lien.  The lien may also allow attorneys’ fees to be awarded to the mechanic’s lien claimant (to the extent the parties’ contracts do not already provide so). 

How do you properly record a mechanic’s lien?

The notice and recording deadlines for a mechanic’s lien are short.  The actual requirements of the contents of the lien are detailed.  Failure to satisfy either can be fatal to the mechanic’s lien claim.

Is any pre-lien notice required before I record a mechanic’s lien? 

On commercial projects, there are no filing or notice requirements before recording a lien.  However, Indiana courts have invalidated mechanic’s liens where the actual landowner did not actively consent to the real estate work.  If work is being performed for an entity other than a landowner (i.e. for a store owner in a strip mall who leases the space), the contractor should notify the landowner that work is being performed, invite participation, and detail the benefit being given to the landowner as a result of the work.

For projects involving an owner-occupied residence, there is a requirement to give notice where the contractor is not dealing directly with the owner.  In other words, for a residence, if the contractor is a subcontractor to a general, there is a Pre-Lien Notice requirement.

The contractor must give the Pre-Lien Notice to the property owner within 30 days of first performing work if the project relates to existing construction and within 60 days of first performing work if the project relates to new residential construction.  The Notice is not required to be recorded for pre-existing structures. The Notice is required to be recorded for new residential construction within the same 60 day period.  Failure to give the Pre-Lien Notice (and record it in the case of new residential construction) within the prescribed time frame voids any further attempts to perfect the lien. 

Requirements of a Notice of Intention to File Mechanic’s Lien

The Notice of Intention to File Mechanic’s Lien must include each of the following:

  1. The Amount Claimed.  While the amount claimed should be the easiest part of preparing a mechanic’s lien, I have heard of some practitioners advising their clients to overstate or exaggerate their mechanic’s liens by as much as one-third.  Please understand that any exaggeration of the amount claimed in a mechanic’s lien may invalidate the lien and subject the contractor to damages and attorneys’ fees under deception and slander of title theories.  In other words, never overstate the amount of your lien.
  2. The Name and Address of the Contractor or Person Making the Claim.  This one also appears simple but make sure that the party actually signing the lien is the same person or entity that contracted with the landowner.
  3. The Real Estate Owner’s Name.  It is critical that the actual legal name of the property owner be used.  The actual owner’s name should be obtained from the County Auditor’s or County Assessor’s records.
  4. The Real Estate Owner’s latest address as shown on the property tax records of the county.  Note, this does not necessarily mean the property upon which work was performed.  You must determine where the property owner has the tax bills for the property sent and include that address in the Notice.
  5. The Legal Description of the Property.  This does not mean the “short” legal description that can, often times, be located online or through a County GIS service.  You must include the actual and full legal description for the property in order to ensure validity of the lien. The best bet is to obtain the legal description from the County Auditor or Assessor.
  6. Street and Number of the Property.  If the property has an address, provide it.  If it does not, provide the common description, i.e. “Lot 51 New Redfield Subdivision.”

For residential projects the mechanic’s lien must be recorded within 60 days of last performing work.  For commercial projects that time limit is extended to 90 days.  Often times questions arise as to what “last performing work” really means.  Generally, it is the date upon which the task for which the contractor was hired was completed or the last date upon which the contractor made progress towards completing the task (if it was not completed). 

As long as it is true, it is good practice to include a statement on the face of the lien that work was last performed on the property within 60 (or 90) days. 

The statement must be “sworn”.  That means it should be notarized and affirmed under the penalties for perjury. 

Recording of the Notice of Intention to File Mechanic’s Lien

As a general rule, a mechanic’s lien is perfected by filing the original and a copy of a Notice of Intention to File Mechanic’s Lien in the office of the County Recorded in the county where the real estate is located.  A nominal fee is required at the time of recording so it is a good idea to bring some cash along.  The County Recorder is responsible for mailing a copy of the Notice to the property owner. 

What happens after the lien is filed?   

Once a lien is properly recorded, the contractor has 1 year within which to file a foreclosure lawsuit.  If a lawsuit is not filed within 1 year, the lien will expire.  Additionally, a property owner has the right and ability to demand the contractor foreclose on its lien within 30 days of receipt of the demand.  Failure to initiate a lien foreclosure within that 30 day period may also result in the expiration of the lien. 

The foreclosure can be a long and tedious process and the rights, priorities, and implications of various lienholders is deserving of its own separate post. 

Conclusion

Contractors should understand that the entire process of obtaining information necessary to complete a proper Notice of Intention and actually recording it will take several days.  For residential projects, it is best practice to begin the mechanic’s lien process as soon as the contractor is aware that payment is an issue or no later than 45 days after work was completed.  For commercial projects your time constraint is extended by about 30 days.

While this post focuses on Indiana law, other states have similar but different requirements for mechanic’s liens.  This post is not meant to discuss those requirements. 

If you would like assistance with regard to the filing of Mechanic’s Liens, please feel free to contact me.

 

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