Your chances of having a payment dispute resolved and getting paid increase significantly when you file a mechanics lien. A mechanics lien is one of the most effective tools any construction professional can use, especially when you’re dealing with delinquent clients who rarely pay on time, if at all.
And when your mechanics lien works and gets you paid, chances are you will be asked to cancel or release it. In Montana, canceling a mechanics lien is as easy as filing a Montana mechanics lien release form. This guide explains everything you need to know about filing a Montana mechanics lien release, from the important time frames to the best practices that you must take note of.
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- When to release a Montana construction lien release
- Why do you have to release a Montana construction lien?
- What happens if you fail to release a Montana construction lien?
- How to file a Montana construction lien release
- Best practices when canceling or releasing a Montana construction lien
When to release a Montana construction lien release
A construction or mechanics lien must be released once you have received the full payment for your lien claim. Receiving the payment means the mechanics lien has been satisfied, and the record of outstanding debt that you filed in the county clerk’s office must now be nullified.
When a property owner or any higher-tier party releases your payment, chances are they will also ask you to subsequently cancel or release the mechanics lien that you filed. This is because they want to clear their property’s records and attract potential buyers and financiers who may have looked the other way upon seeing the mechanics lien that you recorded.
In Montana, you must release a mechanics lien within 5 days of receiving a formal request to release or cancel it. This is a mandatory rule that all lien claimants must follow to avoid having to pay potential fines and penalties.
Why do you have to release a Montana construction lien?
A mechanics lien in Montana, or any other state, is a very powerful tool that limits the marketability of a real estate property. Buyers and financiers can see the mechanics lien filed by construction parties, and they do not want to invest in a property riddled with payment claims.
A mechanics lien, then, provides you with leverage in payment negotiations during payment disputes. Consequently, once you finally get paid, you must release or cancel the mechanics lien that you filed so potential buyers and financiers will know that your claim has already been settled.
This means releasing a mechanics lien is done primarily to clear a property’s records. This is for the benefit of the property owners. And in states like Montana, releasing a mechanics lien after payment has been satisfied is a requirement for all lien claimants.
What happens if you fail to release a Montana construction lien?
Failing to release a Montana Construction Lien could result in penalties and fines, so make sure that you file a Montana mechanics lien release within 5 days of receiving a formal request from a property owner or any other interested party.
How to file a Montana construction lien release
1. Prepare the Montana mechanics lien release form
Preparing the Montana mechanics lien release form is fairly easy. You just have to make sure that it includes the following information:
- the clerk and recorder’s file number for your mechanics lien
- the date when the mechanics lien was filed
- the name of the person from whom you are claiming a payment
- your name and address
- a general statement expressing that you are releasing the mechanics lien as it has already been satisfied
You can easily find the required information in a copy of the mechanics lien that you filed. Note that the person who signed your original mechanics lien must be the same person to sign your Montana mechanics lien release form. If you had an authorized agent sign the mechanics lien in your stead, make sure that they also sign the mechanics lien form for you.
2. Record the Montana mechanics lien release
A Montana mechanics lien release is filed the same way as you record a mechanics lien. You have to visit the county recorder’s office and have the lien release form recorded, or mail the lien release form to the office.
Note that you must record the mechanics lien release in the same county clerk’s office where your mechanics lien was originally filed. Also take note of the deadline: you have 5 days upon receiving a formal request from an authorized party to release the Montana mechanics lien. Always remember that failing to meet this deadline could cost you more money, so make sure that you adhere to this very simple rule.
If you do not receive a formal written request from a property owner or a higher-tier party, you can still record a Montana mechanics lien release. You can cancel or release a mechanics lien in good faith, simply to recognize that your payment claim has been settled and the property owner no longer has to worry about a mechanics lien encumbering their property.
Best practices when canceling or releasing a Montana construction lien
1. Release the mechanics lien even without a formal request from the owner
Canceling or releasing a mechanics lien even if you don’t receive a formal written request to do so is one way to build good business relationships with property owners.
Say, for example, you are a subcontractor and a general contractor who owed you payment recently settled their debt. The general contractor may not necessarily ask you to cancel your mechanics lien. However, a property owner will surely appreciate your effort in releasing a mechanics lien even if you were not asked to do so.
2. Verify that a payment has been cleared before releasing the mechanics lien
Before recording your Montana mechanics lien release form in the county clerk’s office, you must first verify that you have actually received the payment. If you received a credit card payment, for instance, you must first make sure that the transaction has been approved and the money is ready for your use.
Be wary of rejected credit card transactions and bouncing cheques. These things could happen during payment negotiations, so even if you received a cheque or a credit card payment, you must still wait until these payments go through before releasing a mechanics lien.
3. File the Montana mechanics lien release on the day of receiving the request, if possible
Remember that there is a deadline to release a Montana mechanics lien. You have 5 days to release a mechanics lien after receiving a formal request, so ideally, you have to release the mechanics lien on the same day that you receive the request.
It may not always be possible to immediately file a mechanics lien release upon receiving a request to do so, but just always keep the 5-day deadline in mind to avoid having to pay penalties and fines.