You’re a contractor that’s got it all together. You’re hired to paint a house. You do it on schedule, exactly like you were told – and agreed to in a written contract. Now the owner won’t pay up. (You can’t just unpaint the house).
At this point, you’re thinking, “what can I do?”
I’m Lawyer Alexandria Serra, this is this blog post is inspired by my latest Lawyer Talk Thursday (catch it on Instagram @alexandriaserra), and you’re about to find out.
Before we get into it, I want to recognize Gabriel S. Perez, J.D., M.B.A who is an Attorney and Counselor at Law. Mr. Perez is licensed in Texas and New Mexico and was kind enough to share information on today’s topic. If you’d like to learn more from him, you are welcomed to reach out to him at firstname.lastname@example.org or find his full contact information at the end of this blog.
In part two of this small claims series, we will explore possible solutions for tradespeople who are not able to collect payment for their work. If you did a job and didn’t get paid, you have three options:
- Do nothing;
- File a lawsuit; or
- File a mechanic's lien (aka a construction lien or material man lien).
Mechanic’s Lien: What is it?
A mechanic's lien is an easy, cost-effective way to protect yourself against clients who don’t want to pay. At times, the terms construction lien, materialman lien, or mechanic’s lien are used when talking about this type of lien, but what you need to know is that it is the same thing.
Practically anyone in the building trades business – contractors, subcontractors, architects, plumbers, construction workers, material providers or landscapers – can use a mechanic's lien to collect a debt from an owner.
In the earlier example, the painter can use a mechanic's lien to collect the $1,000 owed to him from painting the house.
If you are hired in the same scenario, a residential project for a married homeowner, there are specific items that you have to make sure you include in your written contract that must be signed by BOTH spouses for the lien to be valid. Remember, the homestead protection in Texas is strong and your written contract has to be complete before beginning work or else you may forfeit your protections under a materialman lien. Secondly, there are very specific timetables that you have to follow once work is complete in order for the lien to be a valid one, don’t delay!
Is it Better to File Before or After?
A mechanic's lien is a sworn legal document describing who owes you money and how much is owed. The person doing the work will file the lien against the property that they are working on.
You can file this document before the project is started – recommended for big projects - and then remove it after you get paid in full. Or, you can file it after the work is done if the owner refuses to pay you.
But note, the work you were hired to do must be substantially complete for the lien to be valid. So you can’t just file a lien and bounce – you have to do the work.
What Else Should I Know?
Think of a lien as a mini mortgage against the owner’s property. You become a creditor whose debt needs to be paid off. Once you’re paid, the lien goes away.
Liens follow the property, not property owners. Basically, if this property owner refuses to pay the painter, the electrician, and the plumber, each of them can file a separate lien against the property.
If the property is in El Paso, you file the lien in property records with the clerk of our county. The records are open to the public, and they create a “cloud” over the property.
Don’t get it twisted, filing a lien doesn’t mean you’ll get paid right away. It’s often a good idea to send a demand letter first, telling them exactly how much they owe you and giving them notice that you’re serious. Most people don’t want to risk the consequences – bad credit or not being able to sell or refinance that real estate.
Judgement Lien vs. Mechanic’s Lien
Now, back to our topic from last week.
The reverse is also true. If you sued that contractor and won but they refuse to pay, you can file a lien against their property. It’s not called a mechanic's lien, it’s called a judgment lien because you got a judgment against them. Unlike a mechanic's lien, you actually have to file that suit and get a court order.
But it works in the same way. The lien limits that contractor’s ability to sell his/her assets (like property) until you get paid back. Foreclosure may be an option depending on the type of property but that will require judicial action. There are some hoops to jump through, and some exceptions, so make sure you understand the process before you start.
If you have any questions, feel free to email me at email@example.com. If you’d like to reach Gabriel S. Perez, feel free to contact him at:
Gabriel S. Perez, J.D., M.B.A
Attorney and Counselor at Law
Licensed in Texas and New Mexico
Direct Telephone: 915-320-4336
609 Myrtle Avenue, Suite 100
El Paso, Texas 79901
New Mexico Office:
1100 Lomas Avenue NW, Suite 1
Albuquerque, New Mexico 87102