Know your notice: Liens across the United States 

Construction credit professionals know that risk can lurk around any corner, with each transaction posing a threat of late or missing payments. Luckily, there are laws that carve out special protections for credit managers working in construction.  

Why it matters: Lien rights are central to a well-rounded credit approach in construction, requiring credit managers to learn the specific lien laws for each state where they are involved in construction projects. While many credit professionals are aware of lien laws, they may be less familiar with statutorily required notices—legally mandated documents that must be accurately completed and delivered before a lien can be filed. Missing these can completely invalidate your lien rights, even if the work was completed perfectly.

“Lien laws come with strict deadlines and plenty of nuances,” said Sam J. Smith, senior corporate and collections manager for Crescent Electric Supply Company (East Dubuque, IL). “No two states are exactly alike, which keeps things interesting for us credit folks.” 

The timeline around lien laws varies in each state, with different deadlines for filing a preliminary notice about retaining the right to file a lien and then the lien itself. Timelines can be based around project completion, or the last date the lien claimant provided labor or materials, or some combination of the two.  

For example, in Florida, a preliminary notice must be sent within 45 days of the initial furnishing of materials or labor, and a mechanics lien must be filed within 90 days from the last furnishing of materials or labor. Comparatively, in California, a preliminary notice must be served within 20 days of the first day the claimant provided materials or labor, and the deadline to file a lien is 90 days after the end of the project as a whole.   

“Deadlines matter,” Smith said. “Miss them, and you lose your rights for the work tied to that period. If you’re required to send a notice within 20 days but send it on day 30, you lose protection for what you delivered during that gap. That’s real money left on the table.” 

Whether or not a preliminary notice is required varies in each state, but sending a notice can help secure payment before a lien is required. “Most customers, especially in the construction industry, pay very close attention to preliminary notices,” said D’Ann Johnson, CCE, corporate credit and contracts manager at A-Core Concrete Cutting (Salt Lake City, UT). “The customer won’t want to get in trouble with their general contractors, so they are quicker to pay before we have to file a lien.” 

Who qualifies for a lien, who must receive a preliminary notice and other factors that could hinder your lien rights vary from state to state as well. Law changes also reshape the lien process and each state has a different legislative schedule, meaning your lien processes may have to change as new legislation takes effect. It is important that credit managers develop a system to stay on top of lien regulations in all the states they operate in, whether it is through credit groups, third-party resources or continued education. 

“Don’t shy away from the legal side,” Smith said. “Learn how liens, bonds and other security tools really work. Many avoid this area because it feels complicated and they are afraid. However, mastering it makes you a real asset to your company and your industry.” 

The bottom line: Each state’s lien laws are unique with their own idiosyncrasies, meaning construction credit managers with operations in multiple states must not only familiarize themselves with each state’s lien processes, but create a system to ensure they are aware of any law changes.  

If you’re looking to learn more about lien laws, register for these upcoming webinars:  

Georgia’s Push-Me/Pull-You Lien Provisions: Pre-Lien Notices and Lien Waivers with Beau Hays, attorney with Hays and Potter, LLP, on July 28 at 3 p.m. EST. 

Pure Michigan, Pure Protection: Navigating Notice Laws in the Great Lakes State with Gerald J. Richter, partner, with Facca, Richeter and Pregler, P.C., on Aug. 6 at 3 p.m. EST.  

Texas Tough: Mastering Notice & Lien Rights in the Lone Star State with Jason Walker, shareholder and director of construction litigation for Andrews Myers on Sept. 16 at 3 p.m. EST.