Tuesday, March 27, 2012

E-Shopping, E-Courts, E-filing, E-lated...But Mechanics Liens Aren't So Easy!

A recent phone call from a frustrated client of LienItNow.com who had to file their mechanics lien that same day inevitably led to the question: "Why can't you just file the lien electronically?"  The answer is enmeshed in a network of statutes, laws, codes and regulations contained in each of the 50 States of our Union: but the short answer is "because the clerk needs to see the original ink on the document."


 While in many States there's no specific law or regulation requiring that original signed mechanics liens or construction liens be presented to the clerk for filing, nearly every clerk requires it nonetheless.  This can slow down the process of filing a mechanics lien, especially when the clerk mistakes black ink for a copy and returns it to the filer! (It happens more often than you think). Utah mechanics liens are the only liens that can be filed electronically. 


Items such as bond claims, prelien notices and stop notices generally do not need to be filed with the clerk's offices, and therefore fax and electronic copies are generally acceptable.


So why does the clerk need an original, signed construction lien?  The reasons vary from State to State, but for the most part anything that is being recorded in the land records office must be an original document.  From mortgages and notes to deeds, the clerk wants to make sure that no tampering has taken place with a document that is being filed. In an age where photoshop and other programs have made changing pictures and documents ever easier, most States believe that the original signature has enormous value. Of course, nothing keeps someone from just forging another person's name, but that is a discussion for another day.


As the internet becomes more and more safe, and as digital signatures become acceptable, we still may not see a day when it is common to e-file a construction lien. Why not? First, because states are slow to change their laws; but a bigger reason is that property owners do not want to make it easy to file encumbrances like deeds, mortgages and liens on a property. 


Encumbrances such as mechanics liens can make it hard to resell, refinance, or finance a property.  Making it easier to file an encumbrance will cause more to be filed, slowing down the rate of transfer of real estate, and potentially damaging a State's economy.  Take New Jersey for instance, which has increasingly made it harder to file a commercial construction lien or a residential lien.  Over the past year, New Jersey has enacted a new set of laws restricting the time frame for beginning the already cumbersome process of filing a residential lien to 60 days from the last date of work.  If a contract is with a tenant, the new commercial construction liens can only be placed against the land if the tenant's lease with the owner explicitly authorizes the work and permits liens to be filed on the  property.  All these New Jersey Construction Lien Law restrictions are a result of a concern that the uninhibited sale of real property will hurt New Jersey's economy.


So, here's hoping that one day the more states will allow electronic filing of mechanics liens...but don't count on it!





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