Filing a mechanics lien can be a complicated and tedious process. There are strict rules to follow, and failing to adhere to these rules may cost you your lien rights.
Serving the required preliminary notices on time is one such rule. In Kentucky, failing to serve the mandatory pre-lien notice will result in the revocation of your lien rights. This means that even if you file a properly prepared mechanics lien, your lien will still be declared invalid due to your inability to comply with the notice requirements.
This guide will walk you through the important rules and regulations when serving pre-lien notices in Kentucky, from what type of notices to prepare to the best practices that you must keep in mind when serving these notices.
Pre-lien notices in Kentucky
There are two important pre-lien notices in Kentucky: the Notice to Owner and the Notice of Contract.
All parties with no direct contractual relationship with a property owner must serve a Notice to Owner to protect their lien rights. A Notice of Contract, on the other hand, is an optional notice that you may file in the town clerk’s office to secure lien priority for your mechanics lien.
Kentucky Notice to Owner
A Notice to Owner in Kentucky is a document that informs a property owner of the amount of payment that you are still waiting to receive. Because this notice is required for parties without a direct contract with an owner, you are essentially informing the owner of an outstanding payment issue.
Serving this notice is important because it allows the owner to step in and potentially settle the outstanding debt. Property owners do not want to deal with a mechanics lien filed against their property, so serving a Notice to Owner may be enough to get you the payment that you duly earned.
When to serve the Kentucky Notice to Owner?
The following deadlines apply when serving a Kentucky Notice to Owner:
Note that for owner-occupied residential projects, a Notice to Owner must be served before a property owner makes a payment to the general contractor. This is because a mechanics lien for this type of project will not be effective for the amount that the property owner has already paid the general contractor or subcontractor prior to receipt of the notice.
IMPORTANT: For full protection, parties working on owner-occupied residential projects must serve the Notice to Owner before a property owner issues payment to a higher-tier party.
What happens if you don’t serve a Kentucky Notice to Owner?
The Notice to Owner is mandatory in Kentucky, which implies that failing to serve the notice within the required deadline will automatically result in the revocation of your lien rights. You may not file a valid mechanics lien if you do not meet this deadline.
How to serve a Kentucky Notice to Owner
1. Prepare the Notice to Owner form
There are no specific details that must be included in the Kentucky Notice to Owner. The minimum requirement is that it must contain:
- a statement that says a property owner may be held liable if payment is not made
- the amount that will be claimed in a possible mechanics lien
Other important details that are usually included in a Notice to Owner include:
- your business name and address
- the name and address of the property owner
- the name and address of the party that hired you
- a brief description of the service that you rendered on a project
2. Serve the Notice to Owner
A Notice to Owner must be served on a property owner within the statutorily imposed deadline via certified or registered mail.
Note that only the property owner is the mandatory recipient of this notice. Also keep in mind that in Kentucky, a Notice to Owner is considered delivered when it has been received by the property owner, so make sure that you have documented proof that a property owner has received your notice.
Kentucky Notice of Contract
A Notice of Contract is another pre-lien notice in Kentucky which is filed in the county clerk’s office to secure lien priority over other types of claims such as mortgages. This notice is NOT required, although having lien priority over other encumbrances will give you a higher chance of receiving your payment if the payment issue gets elevated to a foreclosure lawsuit.
When to file a Kentucky Notice of Contract?
You may file a Notice of Contract anytime – the key thing to note is that lien priority is determined by how soon you file this notice. If you want to gain priority over a mortgage, you must file your Notice of Contract before a mortgage is filed.
What happens if you don’t file a Kentucky Notice of Contract?
There are no dire consequences if you fail to file a Notice of Contract. You still keep your lien rights intact. The only drawback is your lien priority may be on the lower end if other claims are filed against a property.
How to file a Kentucky Notice of Contract
1. Prepare your Notice of Contract form
The following information must be in your Kentucky Notice of Contract form:
- Your name and address
- The name and address of the property owner
- The name and address of the party that hired you
- The amount of the service that you have provided to a project
- A description of the property that is sufficient for identification
- Your last day of work
2. File your Notice of Contract in the county recorder’s office
This step is similar to filing an actual Kentucky mechanics lien. You record your Notice of Contract in the clerk’s office in the county where your project is located, and you pay the corresponding fees.
Best practices in serving a pre-lien notice in Kentucky
1. For owner-occupied residential projects, serve a Notice to Owner as early as possible.
In Kentucky, a mechanics lien for owner-occupied residential projects is not enforceable over the amount that the owner has already paid prior to receive a Notice to Owner. This implies that if you want full lien protection, you should deliver your Notice to Owner before an owner pays a general contractor, subcontractor, or a higher-tier party.
2. Be prompt in serving the Notice to Owner
For all types of projects, failing to serve a Notice to Owner on time will automatically result in the revocation of your lien rights. Serving a properly prepared Notice to Owner before the required deadline is very crucial if you want to secure your right to file a mechanics lien, so make sure that you serve this notice promptly.
3. File a Notice of Contract if you want lien priority
Certain projects may have mortgages and other conveyances on them, so if you want lien priority, you can go the extra mile and file a Notice of Contract in the local town clerk’s office.
Having lien priority is important, especially if the payment dispute turns into a foreclosure lawsuit and other parties also have interest in recovering payment from the sale of a property.