Preserving Lien Rights: A Guide for Contractors and Subcontractors

Introduction

When working in the construction industry, it’s crucial to understand and protect your rights to payment. One essential aspect of this is preserving your lien rights. In this article, we’ll explore what lien rights are, why they matter, and practical steps to ensure you maintain these rights throughout a project.

What Are Lien Rights?

A lien is a legal claim against a property that serves as collateral for unpaid debts related to construction work. Contractors, subcontractors, and suppliers can file liens to secure their right to payment. Here’s why lien rights matter:

1. Security: Liens provide security by allowing you to claim a stake in the property. If the property owner fails to pay, you can potentially foreclose on the property to recover your dues.
2. Priority: Liens establish a priority order for payment. The first lien filed generally has a higher priority. If multiple parties are owed money, the order of liens determines who gets paid first.
3. Enforcement: Liens give you leverage to negotiate payment or take legal action if necessary.

Steps to Preserve Lien Rights

Lien rights act as a safety net for contractors, subcontractors, and suppliers. These parties often invest significant funds upfront in a construction project. Lien rights ensure they have a legal avenue to seek payment if they aren’t compensated promptly. In order to exercise these lien rights it is important to understand and take the proper steps to preserve lien rights.

1. Provide Preliminary Notice to Preserve Lien Rights:

   • Wisconsin Statute requires that all Prime Contractors who contract directly with an owner and who contract with any subcontractor or material supplier provide notice of their lien rights to the owner of the land, prior to or within 10 days of the commencement of work.

   • Wisconsin Statute also requires that notice be given by all contractors, subs and suppliers who are not contracting directly with the owner of the land. However, no notice is required where:

     • (1) The project is residential and provides or adds more than 4 dwelling units, or
     • (2) Where the project is at least part non-residential, or
     • (3) Where the prime contractor is an owner of the property. Wis. Stat.§ 779.02

2. Document Everything:

   • Keep detailed records of your work, materials supplied, and communication with project stakeholders.

   • Document dates, invoices, change orders, and any other relevant information.

Filing a Lien Claim

If you have preserved your lien rights you are now prepared to file a construction when a situation arises where you haven’t received payment for work or materials provided on a construction project.

1. Serve Notice of Intent to File Lien:
   • Prior to filing a lien, a contractor or subcontractor, must, at least 30 days before filing the lien, provide written notice of their intent to file a lien claim on the owner of the land. Wis. Stat. § 779.06
   • The notice of intent to file a lien warns a property owner of your intent to file a lien if payment isn’t made promptly.

2. File a Lien Within the Statutory Period:

   • After 30 days of serving preliminary notice, a contractor or subcontractor may file a lien on the owner of the land.

   • This lien must include accurate information about the property, the amount owed, and your role in the project.

   • This lien must be filed within six months of the date you last performed work on the land. Wis. Stat. § 779.06.

3. Record the Lien with the County Recorder:

   • After preparing the lien, record it with the county recorder’s office. This step officially places the lien on public record.

4. Monitor Deadlines:

   • Be aware of deadlines for enforcing the lien. If necessary, pursue legal action to enforce your rights.

5. Consult Legal Counsel:

   • If you encounter payment issues, consult an attorney experienced in construction law. They can guide you through the process, help you draft a lien, and advise on enforcement options.

Conclusion

Preserving lien rights is essential for contractors and subcontractors. By understanding the process, documenting your work, and following legal requirements, you can protect your financial interests and ensure fair compensation for your services.

Remember, timely action is key to maintaining your lien rights throughout a construction project. Our experienced team can assist you in preparing notices to preserve lien rights and notices of intent to file liens, and preparing, filing, and enforcing liens.

Feel free to reach out to the legal professionals at West & Dunn online through our Contact Us page or by telephone at (608) 535-6420 for a free consultation.