Thursday, April 29, 2010

Delaware Mechanics Lien Filing "How To"

Liens filed on private property or on funds relating to a public project are known as Mechanics’ Liens. When a lien is filed with regard to work performed on privately owned property, it attaches to and encumbers the fee simple ownership of property.

Contractors who have a contract with an owner as well as subcontractors and suppliers who have a contract with a contractor can file a lien. Design professionals may also file liens.

Delaware is one of those States where filing a construction lien is difficult.  To file a mechanics lien, claimants must petition the court in which the property is located.  While Delaware claims to have two ways of doing this, both ways are just as time consuming and expensive.  For corporations, the court will not accept verified mechanics lien statements or petitions to file a mechanics lien unless the corporation is represented by an attorney.  The cost factor, therefore, rises dramatically, as does the waste of time factor.

Prior to filing a Delaware Mechanics Lien, a Notice of Intent to Lien should be served on the Owner.  While not required, it does often have the effect that a lien would have.

If you have served a Notice of Intent to File a Delware mechanics lien claim and no resolution is reached, you should then petition the court to permit the filing of a mechanics lien claim.  A contractor who (1) has contracted directly with the owner or reputed owner of a building and (2) has furnished both labor and material for such structure, must file its statement of claim not less than 90 nor more than 120 days following the completion of the structure.

All other persons must file their statement of claim within 120 days from the last date they provided labor or materials for the Project.

Note that to file a Delaware mechanics lien claim, you do not need a written contract.  In fact, implied contracts are sufficient if you have sufficient documentation to show the existence of an agreement.

The purpose of filing a Delaware mechanics lien is to help the claimant collect the money that is owed on the project.  On a private project, the mechanics’ lien places an encumbrance on the property that makes it difficult to resell or re-finance the property without first removing the lien.

For public projects, Delware does not normally allow construction lien filings.  Instead, most public projects are required to have a payment bond in place for the benefit of subcontractors and suppliers.  For public projects, there are a couple of things that you can do to protect yourself that are as, if not more, effective than filing a lien claim.  Those two things are filing a Stop Notice and filing a payment bond claim.

A Stop Notice is a notification that has the ability to enhance the effectiveness of a mechanic’s lien.  A Stop Notice, or a notice to withhold funds, is sent to the company that is financing or funding the construction funds for a project.  Once that company receives the Stop Notice, that company has notice that it should withhold sufficient money to satisfy the stop notice claim.  The purpose of the Stop Notice is to provide the lender, financiers or funders of the construction project notice that there is money owed to a contractor, subcontractor or supplier so that an inquiry can be made as to why that money is not being paid.

Bond claims can only be filed on a project where the owner, contractor or subcontractor have obtained a payment bond to ensure that every contractor receives payment for the work performed on the Project.  The payment bonds issued by sureties for construction projects have specific timing requirements, but most require claimants to submit claims against the bond within sixty to ninety days from the claimants’ last date of work.  Bond claims as or more effective than a lien claim because the payment bond acts as a guarantee that payment will be made for work properly completed.

For more information on filing a Delaware Construction Lien, a Delaware Mechanics Lien, a Delaware Stop Notice, a Delaware Bond Claim, or a Delaware pre-lien notice (notice of intent to file lien), please visit http://www.lienitnow.com/delaware-faq.asp.

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