As a contractor, subcontractor, worker or suppler in Indiana who has not been paid (or concerned about payment) for your labor, materials or equipment to improve a private owner’s real estate, you have a powerful tool to secure payment for your work, and possibly recover your attorney’s fees and costs incurred to collect the money you are owed – a statutory mechanic’s lien.
A mechanic’s lien is a statutory means to secure payment for your labor, materials or equipment by filing a sworn statement in the office of the county Recorder where the work is performed, setting forth the amount of the claim, your name and address, the owner’s name and address, the legal description of the land as set forth in the latest entry transfer books of the county auditor, and the street and number address, if any, of the owner’s land, as required by Indiana law. Indiana law also specifically permits your attorney to file the lien on your behalf.
Because a mechanic’s lien right is purely a statutory creation, the requirements for acquiring a mechanic’s lien must be strictly adhered to before your lien can attach to the owner’s property.
A right to a mechanic’s lien on an owner’s property improved by your labor, material or equipment does not require that you contract directly with the owner. However, the owner must have authorized or “actively consented” to your improvements to his property.
If you contract or otherwise deal directly with the property owner, there is likely no issue as to the owner’s “active consent.” If you are a subcontractor, laborer or supplier of a contractor who has a contract with an owner, and your contractor is authorized by the owner to perform the work or materials your contractor subcontracted to you, “active consent” is also likely satisfied.
However, if you are furnishing labor, materials or equipment for a tenant of the owner, e.g., in an apartment or shopping center, the owner must have “actively consented” to your improvements of his property. Mere knowledge by an owner that his tenant is having repairs or improvements made to his leased premises will not subject those premises to a mechanic’s lien.
Timeliness of the recording of your mechanic’s lien with the county recorder is a critical requirement that must be satisfied before your lien can become valid and enforceable.
Indiana law requires that you record (file) your mechanic’s lien in the county recorder’s office not later than 90 days after performing labor or furnishing materials or machinery.1
1Except, you must record your lien not later than 60 days after performing labor or furnishing materials or machinery for improvement to certain residential property, such as a home, townhouse or a building or structure intended to contain or contains one or two dwelling units or related structure.
Also, as a condition precedent to your right to acquire a mechanic’s lien for work provided or materials furnished for the original construction of a single or double family dwelling for the intended occupancy of the owner, you must also furnish to the owner written notice of your intended labor or furnished materials and the existence of your lien rights, and file a copy of that written notice in the county recorder’s office not later than sixty (60) after the date of the first delivery or labor performed.
Failure to comply with these notice requirement(s) is fatal to the validity of any mechanic’s lien.
Even though the statutory time periods for recording your mechanic’s lien are straight forward, issues often arise as to when the time period begins for recording your lien. Exactly when did you last perform your labor or furnish materials or machinery for a project?
For example, if you have completed the work for which you contracted, but go back to the job site to remove your equipment or tools, was the start time for recording your lien extended by your return to the job site? Likely not. That was only incidental to your work. Any “incidental” activity by you following the completion of the work for which you were hired does not extend the time for the start of the 90-days or 30-days period to record your mechanic’s lien.
Another example. Sometimes an issue may arise as to whether your work that involves multiple projects on the same property or location, or for the same owner or contractor, can be “tacked” to last labor, material or equipment provided for the improvement of that property.
If all your work for an owner or contractor was under one master contract, it is likely that all the labor, material or equipment you provided under that one contract will be included in your foreclosure action, even if earlier work you provided or furnished was before the 90-days or 30-days statutory time period for recording your mechanic’s lien. On the other hand, if your work was for various projects, even at the same location or for the same owner or contractor, was not under a single contract, your mechanic’s lien will likely be valid only as to your labor, materials or equipment provided within the 90-days or 30-days statutory period.
If you timely recorded your mechanic’s lien, you have one year after recording your lien to enforce your lien by filing a complaint in the circuit or superior court of the county where the improved real estate or property is located. Otherwise your lien will be void.
However, the owner or other party having an interest in the real estate subject to your lien may force you to file a legal action to foreclose your lien within thirty days, by giving you notice by registered or certified mail to require you to sue. Your lien will be released if you fail to do so.
Also, your mechanic’s lien may be released if the defendant in any foreclosure lawsuit, or property owner, or any other person having an interest in the property subject to the lien, including a mortgagee or other lienholder, files a written undertaking with a surety approved by the court, and agrees to pay any judgment that you may recover if the lien is found by the court to be valid and enforceable. In such a case you are still protected with the undertaking by a qualified surety, even though the owner’s property would no longer be subject to your lien.
If you recover a judgment of any sum in your foreclosure action, you may also be entitled to recover your attorneys’ fees, unless the contract consideration for your work was paid by the property owner or the party for whom the improvement were constructed.
The lesson here – if you are concerned at all about being paid for your work to improve the property of another – is to be mindful of the statutory time periods required for recording your mechanic’s lien and be certain that you are fully compliant with Indiana law.
The foregoing is only a brief overview of some portions of applicable law, and is not intended to be a complete analysis of all your rights and obligations. As generally discussed above, your right to record and enforce a mechanic’s lien is purely a statutory creation and requires strict compliance with Indiana law. Kroger Gardis & Regas’ experienced construction attorneys welcome the opportunity to discuss with you any particular issue or concern you may have, and are available to assist you in protecting and enforcing your mechanic’s lien rights.