Having a mechanic’s lien on your home or having to serve one to a customer who won’t pay can be a complicated experience. A mechanic’s lien legally records an unpaid debt. This type of lien is attached to the property’s title, so the debt has to be paid before the property owner can sell the home or land.
A notice of intent to lien is a warning step to take before putting a lien on a property. But how exactly does it work, and when is it necessary? Learn more about the basics of lien notices below.
What Is a Notice of Intent to Lien?
A notice of intent to lien (NOI) is a letter that notifies a property owner they have an overdue payment for rendered services. It also establishes the service provider’s intention to file a mechanic’s lien if the property owner doesn’t make their payment by a certain date. The NOI isn’t a legal document. Instead, it’s a warning that legal steps will follow.
When you file a mechanic’s lien, it becomes attached to the title of the property. This means that you must pay the debt before you can sell the property. The mechanic’s lien puts the debt in a similar category as the mortgage loan you used to purchase the property. That’s because you can’t profit from the sale of the property before first satisfying these debts.
Depending on the state you live in, a mechanic’s lien may even have legal priority. This means you’d be obligated to pay it before making your mortgage payment. A lien has serious implications for both a property owner and anyone else with interest in the property. That’s why the NOI is an important precursor to filing a lien.
What Is the Purpose of a Notice of Intent to Lien?
The NOI serves two purposes. In some states, you have to show a record of sending an NOI before you can legally file a mechanic’s lien. When it’s a legal requirement, an NOI satisfies that step by ensuring you tried other ways to obtain the payment before filing a lien.
The primary purpose of an NOI is to (hopefully) prompt the person who owes money to pay their debt. Having a mechanic’s lien filed on a property you own can be expensive. Even if you ignore a lien for decades, it can come up again if you try to sell the property. It’s less costly for the company and the debtor if the debtor pays their bill before the business has to spend time and money going through the legal steps of filing a mechanic’s lien.
When should a service provider use a notice of intent to lien? It’s a best practice to send an NOI any time filing a mechanic’s lien is an eventuality. If you live in a state where it’s a legal requirement, you must send an NOI, according to the legal timeline established in your state, before you can file a mechanic’s lien.
When you send an NOI, you should also consider the legal timeline in your state for filing a lien. You may have to let a certain amount of time pass after the completion of the construction project to file a lien.
Requirements for a Notice of Intent to Lien
Although most states don’t require a business to send an NOI before filing a mechanic’s lien, it’s wise to make an NOI a clearly worded, legally sound document. For the purposes of receiving payment, the NOI should clearly explain who the service provider is, what services were provided, the amount of money owed, ways to pay the bill and the final date for payment to avoid the filing of a mechanic’s lien.
Perhaps the most important requirement for an NOI is to send it to the right place. If you file a mechanic’s lien, you’ll file it against the property owner. Before sending the NOI to the person who hired you, make certain you know who the property owner is. For example, a property manager or a tenant may have hired you, but you’ll need to file a lien against the legal property owner, not one of their employers. On a larger construction project, a general contractor may have hired you, but you may need to file a lien against the corporation that owns the property.
Although you can hope for a better outcome, act with the assumption that the NOI could be used as proof in a lawsuit against the property owner. Take care to type up the letter, use your company logo and proofread it carefully. Be certain to avoid unprofessional language. Make your letter clear and concise.
What to Do If You Get a Notice of Intent to Lien
If you get an NOI, take immediate action. You need to pay, dispute the charge or try to negotiate with the service provider quickly. Even if there’s some disagreement between you and the service provider, it’s often easier to settle the dispute out of court than to have a lien filed against your property and go through the expense of removing it.
If you have the means to pay for the service explained in the NOI, you should make immediate payment. To protect your rights, it’s wise to pay in such a way that you have a receipt and proof of the payment. Payments made by check, credit card and debit card are easier to prove than those made in cash.
If you don’t have the means to pay, reach out to the service provider. Although it’s not the rule, many service providers are willing to set up payment plans or negotiate with people who stay open to communicating with them. Often, communication early on can remove the need for an NOI. If you don’t agree you owe the payment, you should still reach out to the service provider to contest the charge. When you take prompt action in response to an NOI, you could avoid having debts attached to the title of your property.
