Tuesday, May 18, 2010

Tennessee Mechanics Lien Guidelines

In Tennessee, liens filed on private property or on funds relating to a public project are known as Mechanic’s Liens. When a Tennessee mechanics lien is filed with regard to work performed on privately owned property, it attaches to and encumbers the fee simple ownership of property. When a Tennessee mechanics lien is filed with regard to work performed on a publicly or government owned property, it attaches to the fund of money which the public agency has allocated for a project. The reason for this is that you cannot force the sale of publicly owned land (public agencies mean any county, city, town, township, public commission, public board or other municipality authorized by law to make contracts for the making of any public improvement in any city, town, township or other municipality).

As for who can file a Tennessee mechanics lien claim, the law allows that all persons providing labor or materials for the construction, repair, or improvement or removal of any permanent building or structure next to real estate are entitled to a Tennessee mechanics’ lien. In Tennessee, architects and engineers are entitled to mechanics’ lien rights.

Prior to filing a Tennessee mechanics lien, some claimants are required to provide a pre-lien notice.  In Tennessee, a contractor in direct contractual privity with the owner has no pre-lien notice requirements. However, subcontractors have various pre-lien notice requirements.

Subcontractor pre-lien notice requirements are as follows: a notice of intent to file a lien must be filed within 90 days of the completion of the improvement or 90 days after completion of the contract in order to preserve ones lien rights. In addition, except for residential property, a notice of nonpayment must be provided to the owner and general contractor within 90 days of the last day of the month within which the subcontractor’s labor and materials were provided. Failure to provide this notice of nonpayment will extinguish any potential Tennessee Mechanics Lien rights. Subcontractors are required to give a separate pre-lien notice for each month within which unpaid services or supplies were provided.

As for the timing of when a Tennessee mechanics lien must actually be filed, those with direct contractual privity with the owner have 1 year from their last date of work file a Tennessee mechanics lien; subcontractors have 90 days from their last date of work to file a Tennessee mechanics lien.

Keep in mind that Tennessee does require that, in order to file a Tennessee Mechanics Lien, the lien claimant must have a contract.  However, Tennessee does not require written contracts in order to file a Tennessee Mechanics Lien. Oral contracts are sufficient.

Filing a mechanics lien claim is a great way to protect your accounts receivables because on a private project, the Tennessee mechanics’ lien places an encumbrance on the property that makes it difficult to resell or re-finance the property without first removing the mechanics lien.  On a public project, the Tennessee mechanics lien freezes the money owed to you so that the public entity cannot distribute it to the person that is not paying the lien claimant.

In addition to Tennessee mechanics lien claims, LienItNow.com also provides other methods for collecting money that is owed on a construction project.  These other services include the provision of Stop Notices and Bond Claims.

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 be filed on a project where the owner, contractor or subcontractor has 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 are 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 Tennessee Construction Lien, a Tennessee Mechanics Lien, a Tennessee Stop Notice, a Tennessee Bond Claim, or a Tennessee pre-lien notice, please visit http://www.lienitnow.com/Tennessee-faq.asp.

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