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This is an overview of the actions that construction lienors and property owners should take to protect themselves in the event that lienors are not paid for improvements they made to the owner‘s property.
Lienors Must Serve a “Notice to Owner” to Recover on a Claim of Lien
Subcontractors, sub-subcontractors and materialmen who have not contracted directly with the owner to make improvements to the owner’s property must serve a “Notice to Owner” upon the owner and all parties listed in the “Notice of Commencement.” This notice must be served before commencing work or within 45 days after the labor, materials or services were first provided and before the owner pays the full amount due. The “Notice to Owner” should contain:
- The lienor’s name and address
- A description of the owner’s real property
- A description of the services or materials provided or to be provided
Service of the “Notice to Owner” is a statutory prerequisite to recording a claim of lien. The lienor’s failure to timely serve the notice is a complete defense to enforcement of the claim of lien against the owner’s property.
Many commercial landlords face a common but preventable problem: construction lien liability for tenant improvements. This issue comes up when the tenant voluntarily hires contractors to make improvements to the landlord’s property but fails to pay them in full. To recover the monies owed to them, the contractors file construction liens against the landlord’s property and sue the landlord to foreclose on the liens.
Construction liens cloud the landlord’s title to the real property and can prevent its sale or refinancing. Additionally, landlords can be held liable to construction lienors, such as general contractors, subcontractors and materialmen, for improvements they made for the tenant. Consequently, landlords must take certain actions to shield themselves from liability against tenant improvement construction liens.
Review the Lease Agreement
The lease agreement should not contain express or implied language that requires the tenant to do anything to improve the property. If the lease agreement obligates the tenant to make improvements, any liens arising from those improvements can attach to the landlord’s real property interest.