How to File an Indiana Mechanics Lien and Recover Unpaid Compensation | Handle

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How to File an Indiana Mechanics Lien and Recover Unpaid Compensation

How to File an Indiana Mechanics Lien and Recover Unpaid Compensation

September 17, 2020

A mechanics lien works to get you paid for your job on a construction project in the event of a payment dispute. It does so through its ability to limit a property’s market value effectively. Potential buyers and financiers are wary of investing in a property with a mechanics lien record; a mechanics lien filed against the property will spur its owners to pay off the outstanding debt to get rid of the lien claim.

Filing a mechanics lien may seem daunting at first, but the process is not that difficult as long as you come to understand the applicable rules and requirements. All construction participants should familiarize themselves with these rules because recording a mechanics lien can be your best defense against delinquent clients.

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This guide explains the rules and requirements for filing a mechanics lien in Indiana, including the best practices that you must keep in mind to ensure that you record a valid claim.

Who can file a mechanics lien in Indiana?

The parties who have lien rights in Indiana include general contractors, subcontractors, and material suppliers. As in most states, suppliers to suppliers are generally not allowed to file a mechanics lien in Indiana.

Preliminary notices in Indiana

There are two preliminary notices in Indiana that you must take note of, the Notice of Mechanics Lien Rights and the Notice to Owner of Personal Liability.

Notice of Mechanics Lien Rights

Who must serve a Notice of Mechanics Lien Rights?

Parties who have no direct contract with the property owner of a residential project must serve a Notice of Mechanics Lien Rights on the owner. Note that this requirement only applies to residential properties.

What must be included in the Notice of Mechanics Lien Rights?

The Indiana Notice of Mechanics Lien Rights form must contain these details:

  • the exact or estimated contract amount
  • the date the services were first and last furnished
  • a description of the services furnished
  • the name and address of the owner
  • the name and address of the party who hired you
  • your name and address

The Notice of Mechanics Lien Rights is served via certified mail with return receipt requested.

When do you serve a Notice of Mechanics Lien Rights?

There are two deadlines for serving this Indiana preliminary notice, depending on your role on a project:

  • For parties working on new residential construction: within 60 days of your first day of work
  • For parties working on residential improvements and repairs: within 30 days of your first day of work

Also, note that parties working on new residential construction in spec homes or subdivisions should file the Notice of Mechanics Lien Rights in the office of the county recorder. This is in addition to serving the document on the property owner.

What happens if you do not serve a Notice of Mechanics Lien Rights?

You will lose your lien rights over the project at hand if you do not serve a Notice of Mechanics Lien Rights on time.

Notice to Owner of Personal Liability

Who must serve a Notice to Owner of Personal Liability?

The Notice to Owner of Personal Liability is an optional preliminary notice for all parties with no direct contract with the property owner. Since it is an optional notice, no party is mandated to serve it on the owner.

Note that this notice works similarly as a stop notice.

What must be included in the Notice to Owner of Personal Liability?

The Indiana Notice to Owner of Personal Liability form must contain these details:

  • the exact or estimated contract amount
  • the amount being claimed
  • the date the services were first and last furnished
  • a description of the services furnished
  • the name and address of the owner
  • the name and address of the party who hired you
  • your name and address

The Notice to Owner of Personal Liability is served via certified mail with return receipt requested.

When do you serve a Notice to Owner of Personal Liability?

This Indiana preliminary notice may be served at any time. There are no deadlines associated with it as it is an optional preliminary notice in Indiana.

What happens if you do not serve a Notice to Owner of Personal Liability?

Your lien rights will remain intact even if you do not a Notice to Owner of Personal Liability. The benefits of serving this preliminary notice include allowing a property owner to withhold payment from a general contractor until you receive your payment; serving this notice is a good idea even if you are not obligated to do so.

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When do you file an Indiana mechanics lien?

There are two deadlines for filing an Indiana mechanics lien:

When do you file an Indiana mechanics lien

How to file a mechanics lien in Indiana

How to file a mechanics lien in Indiana

1. Prepare your Indiana mechanics lien form

According to IN Code § 32-28-3-3 (2019), your Indiana mechanics lien template must contain the following details:

  • the amount claimed;
  • the name and address of the claimant;
  • the owner’s:
    o name; and
    o latest address as shown on the property tax records of the county; and
  • the legal description and street and number, if any, of the lot or land on which the project is located

Note that attorney fees and other lien-related costs are generally not included in the amount that you can claim on an Indiana mechanics lien. Also, make sure that the names and addresses are spelled correctly and completely. Always write the full business name of a company, including the applicable suffixes such as Ltd. or Inc.

Note that there is no statutory template for an Indiana mechanics lien as long as all the details mentioned above are included on your form.

The Indiana mechanics lien must be notarized before filing, unless it is prepared by an attorney. Be aware that Indiana requires you to prepare two copies of your mechanics lien form. The second copy is mailed to the property owner.

2. Record the Indiana mechanics liens

When your Indiana mechanics lien forms are all ready for filing, you have to mail the documents or personally bring them to the office of the county recorder in the same county where the property in question is located.

Filing a mechanics lien comes with associated fees, so be prepared to include the filing amount in your parcel or bring cash to the recorder’s office for payment. You may call the recorder’s office to know how much filing a mechanics lien costs in your specific county. Be sure to include the exact amount in your parcel when you mail your mechanics lien.

Remember that there is also a very strict deadline for filing a mechanics lien in Indiana. Those working on residential projects have 60 days after their last day of work to record a lien, while those working on other types of projects have 90 days after their last day of work.

After recording a mechanics lien, the county’s recording officer is mandated to mail the second copy of your mechanics lien to the property owner. This is why you should remember to mail or bring two copies of the mechanics lien when you record your mechanics lien in Indiana.

3. Enforce/release the mechanics lien

Two things can happen after you record your Indiana mechanics lien: you either will get your payment or you won’t.

If you do get your payment, the property owner will typically ask you to release the mechanics lien. Releasing a mechanics lien implies filing a record of satisfaction in the same recorder’s office to inform potential investors that your payment claim has been settled.

There are no specific rules for releasing a mechanics lien in Indiana. Even though you are not technically obligated to do it, it is still a good idea to release a mechanics lien to establish a good relationship with the owner as long as the outstanding debt has been paid.

If, on the other hand, you do not receive your payment, you have 1 year after recording the mechanics lien to enforce it. Enforcing a mechanics lien means initiating a foreclosure lawsuit so you can recover your payment through the foreclosure sale of a property. After the 1-year deadline, the mechanics lien expires and is no longer enforceable.

Note that this 1-year deadline may be shortened if the owner serves you’re a Notice to Foreclose. The Notice to Foreclose gives you 30 days upon receipt of the notice to initiate the lawsuit to enforce the mechanics lien. Failing to file a suit within the 30-day deadline will nullify your mechanics lien.

Important dates to remember when filing an Indiana mechanics lien

Important deadlines to remember when filing a mechanics lien in Indiana

Best practices when filing a mechanics lien in Indiana

1. Prepare the Notice of Mechanics Lien Rights as early as possible

If you are one of the parties required to serve a Notice of Mechanics Lien Rights, be sure to prepare and serve it early to avoid missing the deadline. Have a valid Indiana preliminary notice template ready for use so you can easily fill it out once you secure a project. Remember that late service of this preliminary notice is not allowed in Indiana, so failing to deliver this document on or before the deadline will be fatal to your lien rights.

2. Verify the accuracy of the details written on your Indiana mechanics lien form

Always double-check the spelling and formatting of your mechanics lien form. The names and addresses should all be spelled correctly, and all business names must be written in full, including suffixes like Inc. and Ltd. Even if minor errors may not have any direct effect on the validity of your mechanics lien, a document that is riddled with spelling mistakes may be seen as unprofessional.

3. Do not exaggerate the amount claimed in your mechanics lien

Indiana is one of the states that allow its construction participants to recover the full amount of their services, regardless of their role in a project. However, this does not mean that you should inflate the amount of your mechanics lien claim just so you can recover a bigger sum of money.

The claimed amount should still be a reasonable value in relation to the services that you performed in a project. Other amounts, such as attorney fees, may be recovered if the dispute is escalated to a foreclosure lawsuit.

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