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If You Go Big, You Might Be Going Home: The Consequences of Overstating Your Mechanics Lien.

A mechanics lien is a powerful tool for contractors and subcontractors to use when trying to secure payment for work performed on a construction project. But with great power comes great responsibility. 

Mechanics lien laws often have very specific requirements that have to be met in order to effectively enforce the lien. While some of these requirements vary from state to state, one consistent requirement is that the value of the mechanics lien be based on actual work and materials provided and consumed within the project. Contractors are responsible for using reasonable efforts to calculate the proper value of the lien before recording it with the county recorder’s office. Inherent in this is the concept that the contractor has a “good faith basis” – or credible facts – to support the amount of the mechanics lien. 

Minor discrepancies will likely not impact the validity of the mechanics lien, but contractors who intentionally inflate the value of the mechanics lien jeopardize the enforceability of their lien – even for the legitimate amounts. The most obvious examples of inflated costs are for things such as work not performed or materials not provided to the project. But, in most states, even some contract damages, such as attorneys’ fees, interest, or consequential damages, may not properly included as part of the value of a mechanics lien even though they could be recovered through a breach of contract action. 

It is important for contractors to not only be familiar with the procedural steps but also the substantive requirements for perfecting a mechanics lien in order to take full advantage of the power of lien rights. For those contractors working in several states, be careful to follow the rules of the state where the work takes place as mechanics lien laws can vary significantly from state to state. 

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