Timely action is needed to enforce a construction lien.

Businesses operating in the construction sector often generate significant revenue. A single project could be worth six or seven figures, especially if the client is a commercial entity rather than a residential homeowner. In most cases, construction companies do not receive payment in full when they begin work on a project. Instead, they accept a down payment and then establish payment arrangements with the client. Typically, the requirements include provisions establishing a final deadline for the payment of the full balance owed.

If the client does not fulfill their financial obligations in a timely manner, then the construction company may need to pursue a construction lien. Also known as a mechanic’s lien, a construction lien helps preserve the financial interests of a business that provides services or materials for a construction project. After securing a lien, companies need to be ready to act quickly to enforce the lien or may risk becoming unable to do so.

What does lien enforcement entail?

Attempting to enforce a construction lien generally involves foreclosure. The legal process is relatively straightforward, although the property owner does have the right to defend against foreclosure or redeem the property. Lien enforcement may ultimately result in a property owner either refinancing or selling the property in order to fulfill their financial obligations to the firm that provided construction services.

That being said, there are strict statutes of limitations that apply in construction lien scenarios. Typically, businesses have to act within weeks of payment deadlines passing to secure a lien. They also have a limited window of opportunity to enforce the lien by foreclosing after the courts rule in their favor.

The exact statute of limitations and litigation timeline differ from one state to the next. Construction firms may need help reviewing state statutes, contract language and project details to secure and enforce a lien without violating the applicable statute of limitations.

Business owners and executives may feel reticent about taking assertive legal action out of a sense of empathy for clients. In some cases, they may worry that foreclosing on a construction lien could harm their reputation. However, making use of the legal systems in place to protect businesses from financial defaults is unlikely to significantly alter public perception of the company.

Organizations in the construction sector dealing with non-paying clients often need help evaluating their options and taking appropriate legal action, and that’s okay. The sooner the construction firm initiates the legal process, the better the chances of securing a lien, foreclosing on it and securing appropriate payment.

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