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ConstructionPro Week, Volume: 3 - Issue: 22 - 05/30/2014

When Is a Mechanic’s Lien ‘Willfully’ Exaggerated?

By Bruce Jervis

 

Most state mechanic’s lien statutes provide that if a lien claimant willfully exaggerates the amount of its claim, the lien may be declared null and void. Mechanic’s liens provide lien claimants with tremendous leverage against project owners. The purpose of these statutory provisions is to protect owners against overreaching or fraudulent claims.

 

This leads to a question: How does one determine that a mechanic’s lien claim was “willfully” exaggerated? Claims can be overstated for a variety of reasons. The fact the amount of a lien claim exceeded the amount the claimant was legally entitled to recover does not, in itself, establish willful exaggeration.

 

A New York court recently provided some guidance in this regard. If a mechanic’s lien was overstated due to mistake, inadvertence or a good faith dispute regarding the contract requirements, it is not willfully exaggerated. Willful exaggeration requires evidence of intentional misconduct in the calculation and filing of the lien.

 

Is this too strict a standard? Intentional misconduct is hard to prove, particularly in light of the numerous excuses that can be offered to explain the overstatement of a lien claim. We have all seen overstated mechanic’s lien claims. Have you seen claims that you considered willfully exaggerated? I welcome your comments.

 

COMMENTS

Although slightly off topic, here in Illinois liens on public projects can be filed independently by subcontractors of any tier working on the same project. Consequently, liens can be filed by 2nd, 3rd, 4th, etc. tiered subs for amounts which include their lower tiered subs lien amount. The result is the same sub's lien amount can be included in multiple liens filed by the various tiered subs. The public owner is required by statute to withhold ALL lien amounts filed by ALL the subs at any tier from the General Contractors next pay estimate regardless of the fact that there is duplication of lien amounts in the indivual subs liens. The General Contractor must wait until the liens are released either by settlement via negotiation or court order to receive these duplicate withholdings. This is most egregious but legally permissible.
Posted by: phil lachanski - Friday, May 30, 2014 1:17 PM


IT SEEMS TO ME THAT EVERYTHING THAT IS STATED HERE POINTS THE FINGER @ THE CLAIMANT (UNLESS OF COURSE I COMPLETELY TOOK IT THE WRONG WAY).

I PRESENTLY AM A CLAIMANT AS AN ELECTRICAL CONTRACTOR FILING THE MECHANICS LIEN FIRST TO THE OWNER OF THE PROPERTY AND THEN IT GOES TO THE GENERAL CONTRACTOR AS THE PROCESS REQUIRES. I STAND TO BE OUT $45,000.00 (PLUS PUNITIVE DAMAGES) IN PAYROLL MONEY AS THE G.C. HAS PAID THE MATERIAL TO MY SUPPLIER. I HAVE PAID OVER 1000 HOURS OF LABOR AND THE TAXES THAT GO WITH IT. (NOT YET BECAUSE YOU CAN IMAGINE AS A SMALL SHOP WITH AN AVERAGE # OF EMPLOYEE BEING 2-3 I AM OBVIOUSLY OUT OF MONEY.

BY THE GRACE OF THE LORD, I HAVE MANAGED TO TAKE ON ADDITIONAL JOBS THAT MAY PULL ME OUT OF THIS ONE SIDED (G.C.) MESS. IF THE MECH. LEIN DOES NOT BRING THE G.C. FORWARD TO AT LEAST NEGOTIATE, I WILL NOT BE ABLE TO AFFORD LITIGATION AND WILL BE FORCED TO GIVE UP. UNFORTUNATELY THE ONLY WAY TO PROVE THE TRUTH IS IN COURT WITH MANY WITNESSES TO CLARIFY WHAT THE REAL TRUTH OF THE SITUATION IS.

HOW CAN ANYONE MAKE STATEMENTS SUCH AS I HAVE READ HERE UNTIL YOU ARE NOT GUILTY UNTIL PROVEN SO. A RESPONSE TO THIS WOULD BE APPRECIATED.
Posted by: ANONAMOUS PLEASE - Friday, May 30, 2014 3:17 PM


Except for the most egregious of cases (where the answer is likely obvious), it doesn't really matter. Either it gets settled or it goes to court where the actual amounts are determined. Relying on mechanics liens to make sure you get paid are a good way of assuring EVERYBODY, but the lawyers, lose.
Posted by: Dave - Friday, May 30, 2014 9:33 PM










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