THE LIFE CYCLE OF INDIANA MECHANIC LIENS

1. Labor, materials, equipment used at job site automatically creates a lien, however, the lien is not enforceable unless and until it is perfected. (Items 2 and 3 below set forth the process of perfecting the lien).
2. A pre-lien notice must be recorded and served on the property owner within 30 days (60 days for new build) of commencement of work or delivery of materials or equipment. No pre-lien notice required for commercial or industrial liens.
3. Notice of Intention to Hold Mechanic’s Lien must be recorded within 60 days of the last date labor, materials, or equipment used on jobsite (90 days for commercial).
4. A lawsuit to foreclose on a lien must be filed within one year of date the Notice of Intention to Lien was recorded, unless owner demands the lien holder file within 30 days by serving written notice via provable means of service citing the acceleration statute I.C. 32-28-3-10.
5. The lien holder files the lawsuit.
6. Judgment for or against the contractor is entered of record.
7. If lien holder wins judgment, and the property owner fails or refuses to pay, the property can be ordered sold at a sheriff’s sale.

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KEY FEATURES OF A MECHANIC’S LIEN

NON-CONCURENCE OF CONTRACTS: Contractors who perform multiple contracts on one jobsite may find portions of their claim excluded in response to a tacking defense. Stringing multiple contracts together in an effort to circumvent the time limitations prescribed by the notice section of the statute will not rescue an otherwise untimely lien notice.

THE TACKING DEFENSE: “Tacking” is a term used to describe a contractor’s attempt to extend the recording deadline by stringing more recently provided labor, materials or equipment to older claims. For example, a contractor who installs a new roof on a homeowner’s home and completes the project on March 31^st must record his lien notice no later than June 1^st (60 days). If he fails to do that in time, but later installs a new door for the same homeowner on August 1^st, he cannot string the roofing project with the door installation and record a lien on August 2^nd, because the time to file a lien for the roof installation has already expired. A property owner can mount a “Tacking” defense to such actions by a contractor and invalidate portions of the contractor’s claim.

UNDERLYING CLAIMS: Invalidating a mechanics lien does not automatically invalidate the underlying claim, such as a breach of contract, Quantum Meruit, or sums due on account.

PERSONAL LIABILITY: Indiana law allows for a contractor to put a property owner on notice of personal liability and recover the value of his claim, if the owner has not paid the full amount of the project. This claim is like a lien against the owner, rather than the property and does not allow for the recovery of attorney fees.

ATTORNEY FEES: Contractors may be entitled to recover their attorney fees from the owner, if they are successful in their effort to record and perfect the lien within the time limits specified under the mechanic lien statute, which can be found at Indiana Code 32-28-3-1, et seq.

EXCEPTION TO FEES: A lien holder claiming through a general contractor may not have the right to recover attorney fees under the mechanic lien statute, if the owner paid the general contractor in full prior to recording the lien notice.

WHAT TO DO

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Regardless of whether you are a property owner or contractor, you should seek legal representation as soon as you become aware of a mechanic lien issue. For property owners, a properly filed mechanic lien could ultimately lead to the sale of the real estate at a sheriff’s sale. Failing to take immediate action to protect the property and defend against the claim early is a recipe for disaster.

For contractors, a mechanic liens can be very helpful in recovering money due you from a general contractor or the property owner themselves, provided the lien is filed properly. The process of properly recording the lien is strictly controlled by statute and failure to do it by the book could lead to the invalidation of the lien itself. When the lien is invalidated, a contractor often loses the right to recover attorney fees.