Payment disputes and delays happen in the construction business more often than anyone would prefer. In fact, these payment issues are so common that a specific legal method, filing a mechanics lien, was devised to allow construction project participants to recover payment from non-paying clients.
Filing a mechanics lien is a legal right exclusive to the construction industry. When a claimant records a mechanics lien against a property riddled with outstanding payments, future investors will see the record of debt and will be less likely to invest in the property. The property’s market value is reduced when a mechanics lien is recorded, which is why filing a mechanics lien is very effective in recovering delayed payment.
This guide explains the rules and requirements for filing a mechanics lien in the state of Nebraska. As in most states, recording a mechanics lien obligates every potential lien claimant to follow the strict rules in order for their mechanics liens to work.
- Who can file a mechanics lien in Nebraska?
- Preliminary notice in Nebraska
- When do you file a Nebraska mechanics lien?
- How to file a mechanics lien in Nebraska
- Important deadlines to remember when filing a mechanics lien in Nebraska
- Best practices when filing a mechanics lien in Nebraska
Who can file a mechanics lien in Nebraska?
General contractors, subcontractors, and material suppliers all have lien rights in Nebraska. Parties such as landscapers, architects, and designers are also allowed to record a Nebraska mechanics lien.
Notable exceptions include suppliers to material suppliers — these parties do not have lien rights in Nebraska and also in most states.
Preliminary notice in Nebraska
It is common for many states to require potential lien claimants to serve a preliminary notice. Nebraska is one of the exceptions. In the state, you are not required to serve a preliminary notice to preserve your lien rights.
However, serving a preliminary notice is beneficial. It is best practice to communicate with the property owners at the beginning of a project by serving on them a Nebraska preliminary notice.
Why serve a Nebraska preliminary notice?
The primary reason to serve a preliminary notice is that it establishes communication lines between you and the property owner. By serving a preliminary notice, you inform them that you are working on their property and that you are aware of your lien rights in case a payment dispute arises.
It is a common misconception that serving on the owner a preliminary notice is like a threat. In practice, serving preliminary notices is a good business gesture in the construction sector. It is a professional way of helping owners track which parties are working on their projects and ensure that these parties are properly paid.
When do you serve a preliminary notice?
A preliminary notice may be served during the beginning of a project. You can serve it within the first week of first furnishing labor or materials to the project.
What must be included in your preliminary notice?
A Nebraska preliminary notice may include the following information:
- Your name and address
- The name of the party who contracted with you
- The name of the property owner
- A project property description that is sufficient for identification
- The contract amount or a reasonable estimate of the worth of your services
- A statement saying that a mechanics lien may be filed if you do not receive your full payment on time.
Since Nebraska does not have rules regarding serving a preliminary notice, you can tailor it to include the information and statements that you want to convey to the property owner.
What happens if you do not serve a preliminary notice?
There are no consequences for failing to serve a preliminary notice in Nebraska. It is not mandatory, but since serving this document is fairly easy, it is still best practice to communicate with the owner through a Nebraska preliminary notice.
When do you file a Nebraska mechanics lien?
The deadline for filing a Nebraska mechanics lien is on the 120th day after the date you last furnished services to a project. Failing to file a mechanics lien within this 120-day period will cancel your lien rights in the project.
How to file a mechanics lien in Nebraska
1. Prepare your Nebraska mechanics lien form
When preparing your Nebraska mechanics lien form, make sure that it contains the following details:
- Your name and address
- The name and address of the property owner
- A description of the property location that is sufficient for identification
- A just and true statement of the payment demand
- The date when you last furnished labor or services to the project
Note that the Nebraska mechanics lien must be notarized prior to filing. Sign the mechanics lien only when you are in the presence of a notary officer.
2. Record the Nebraska mechanics lien
After preparing the mechanics lien form, file your Nebraska mechanics lien in the registry of deeds of the county where the project is located. Filing may be done by visiting the office in person or by mailing your document.
Note that you need to pay associated filing fees when recording a mechanics lien in Nebraska. When mailing your mechanics lien, be sure that your parcel comes with the exact amount. You can call the registry and ask how much it will cost you to record your mechanics lien. (The amount may vary depending on how many pages your mechanics lien has.)
Also note that it is best practice to bring or mail two copies of your mechanics lien. This is because the next step is about serving a copy of the recorded Nebraska mechanics lien on the property owner.
If you are filing the mechanics lien in person, simply bring the second copy with you and the registry officer will put a stamp on it. If you are mailing your mechanics lien, make sure to include a prepaid self-addressed return envelope and attach return instructions. This way, you can get the second copy of your mechanics lien back and complete the next step.
3. Serve a copy of the Nebraska mechanics lien on the property owner
The next step is to mail a stamped copy of the recorded Nebraska mechanics lien to the property owner. This must be done within 10 days of filing the mechanics lien. Note that this is a statutory requirement in the state of Nebraska — failing to do this will invalidate your mechanics lien.
Serving the copy of the mechanics lien on the property owner may be done via certified mail with return receipt requested. Note that the 10-day deadline must be strictly followed. Consider potential postal delays when mailing your Nebraska mechanics lien. If possible, record the mechanics lien in person or via electronic lien-filing services to ensure that you are able to meet the deadline with no hassle.
4. Enforce/release the mechanics lien
After serving the copy of the mechanics lien on the owner, you are all done. You will most likely recover your payment, although it is also possible that you won’t.
If the best-case scenario happens and you receive your payment, you are technically not obligated to do anything anymore. However, most property owners release payment on the condition that lien claimants release or cancel the mechanics lien. There are no specific provisions in Nebraska laws for releasing a mechanics lien, so the process will take place between you and your client.
If, unfortunately, it does not seem like you will be getting your payment, your next best step is to enforce a mechanics lien. Enforcing a Nebraska mechanics lien means filing a lawsuit for foreclosure of the property. If the property is foreclosed, you will be able to recover your payment through the proceeds of the foreclosure.
You have 2 years after filing the mechanics lien to file a foreclosure lawsuit. If this 2-year period elapses without enforcement action, the mechanics lien expires and it is no longer enforceable. Your mechanics lien is good as gone after this period, so make sure that you enforce a mechanics lien before this 2-year period is over.
Before enforcing a mechanics lien, you should also consider warning a property owner about your impending lawsuit by serving them a Notice of Intent to Foreclose. This step is not required in Nebraska, but doing it can prompt the owner to release payment just to avoid dealing with a lawsuit. Serving a Notice of Intent to Foreclose may help you save money in attorney fees.
However, you should also note that a property owner in Nebraska has the right to force you into a lawsuit before the 2-year deadline expires. If they serve you a notice asking you to initiate the lawsuit, you are obligated to enforce the mechanics lien within 30 days of receiving such a notice. If you do not file a lawsuit within the 30-day period, your mechanics lien will expire.
Important deadlines to remember when filing a mechanics lien in Nebraska
Best practices when filing a mechanics lien in Nebraska
1. Serve a preliminary notice even if not required
Nebraska does not obligate any of its potential lien claimants to serve a preliminary notice, but serving a preliminary notice is still considered best practice. By doing it, you will be able to let the owners know that you are part of their project and it will help them track who you are and what you do, especially in large-scale projects. If you have established a communication line with the owner, there is a better chance that you will receive your payment.
2. File your mechanics lien in person or electronically
If you mail your Nebraska mechanics lien to the registry of deeds, it may take some time before you receive the stamped second copy of your mechanics lien. Since Nebraska gives you only 10 days after the recordation date to serve a second copy of the lien on the owner, the best practice is to file the mechanics lien in person or through online lien services. This way, you will have your second copy right away, and you do not risk failing to meet the 10-day deadline.
3. Serve a Notice of Intent to Foreclose before initiating a foreclosure lawsuit
A foreclosure lawsuit may be costly, but it can be your last resort to recover payment from a delinquent client. Before initiating the lawsuit, consider serving a Notice of Intent to Foreclose on the property owner. They might finally be prompted to release your payment if they know that a lawsuit is brewing. Warning them beforehand can also help you save the time and resources that you might use in enforcing a Nebraska mechanics lien.