Step Nine: The Extra Step
These postings on Mechanics Liens were supposed to be completed in 8 steps but there is another point that needs to be made. If you are paid for some but not all of your outstanding balance, you should reduce the amount of your Mechanics Lien. How do you do that?
You do it cautiously and carefully.
There are a number of Release of Mechanics Lien forms and for the most part they all say the same thing- you have been paid and you are therefore filing the Release and are releasing the property and Owner from any further obligations. Be careful when you do this. The language on the Release will say that you are surrendering, discharging, releasing, and are fully and finally paid for all of the amount in the Mechanics Lien. If you have not been fully paid, you need to cross out that language that says you are fully and finally paid. You do not want to give a Release with this type of language intact if you have not been paid in full.
You may need to record an amended Mechanics Lien that shows the reduced amount and indicates that the release is only for the paid portion, not all of the Lien amount. Be especially careful if you Release the entire Lien and then record another Lien for the reduced amount. Is there still time to do this? Recall from the earlier posts that there are statute of limitations issues that come into play.
For example, assume that you are a subcontractor that has not been paid. The owner has recorded a Notice of Completion. You have 30 days from the date of the Notice of Completion to record your Mechanics Lien. Assume that you have but then the Owner or contractor pays you some but not all of the money you are owed. They make this payment on day 29 after the Notice of Completion. You take the check, cash it, get the funds and are then asked to Release the Mechanics Lien for that amount. You don’t want to Release the existing Lien and re-record a new one though because you are beyond the 30-day limit. You can amend the Mechanics Lien, but you don’t want to record a new one. It will likely be untimely and invalid. Be careful.
One way around this whole issue is the Conditional Lien Release and Final Lien Release. These are statutorily required releases for payments that are made. The General who makes payment to a subcontractor will want these Releases every time he/she makes payment. The language in the Release needs to be the same or substantially the same as what is required by the Code. The Conditional Release and Final Release are the only way that a contractor can release its rights. If you are being paid, or if you are doing the paying, using the Conditional/Final Lien Release forms can be a way to assure that payment is counted against the Mechanics Lien amount.
The long and short of this is, be careful if you have recorded your Lien but then get paid. Don’t just Release and re-Record another Lien. If there is time to do so, then fine; if there is not time then modify the Lien and/or use the Conditional/Final Lien Release documents.