How do you file a mechanic’s lien, foreclose a mechanic’s lien, and get paid for your work if you are a contractor or subcontractor in SC?
First, contact an attorney who can help you to negotiate detailed written contracts for all work that you or your company will perform – the best way to ensure you get paid and to avoid future litigation is to have a detailed contract that covers all possible contingencies.
Then, hopefully, there will not be any question as to what is owed, what work was to be completed, or what materials were to be supplied – or, if the contract is breached, the terms should be clear to a court when you sue to enforce the contract.
Second, file the proper notices for a mechanic’s lien within the statutory deadlines so that, in addition to civil claims like breach of contract, you can enforce the lien and force a foreclosure when necessary.
What is a Mechanic’s Lien?
A mechanic’s lien, or construction lien, is automatically granted to contractors, sub-contractors, and others who perform labor or provide materials that are “used in the erection, alteration, or repair of a building or structure:”
A person to whom a debt is due for labor performed or furnished or for materials furnished and actually used in the erection, alteration, or repair of a building or structure upon real estate or the boring and equipping of wells, by virtue of an agreement with, or by consent of, the owner of the building or structure, or a person having authority from, or rightfully acting for, the owner in procuring or furnishing the labor or materials shall have a lien upon the building or structure and upon the interest of the owner of the building or structure in the lot of land upon which it is situated to secure the payment of the debt due to him.
The mechanic’s lien is intended to ensure that contractors get paid, and it is a remedy that is available in addition to a civil suit based on breach of contract.
Who can Get a Mechanic’s Lien?
Any person or company who provides labor or furnishes material that is used in construction has a mechanic’s lien that can be enforced if they perfect the lien and follow the strict rules contained in SC’s mechanic’s lien laws, including:
- Contractors,
- Sub-contractors,
- Architects,
- Security guards employed during the construction,
- Real estate licensees,
- Tool or equipment rental companies,
- Landscapers,
- Laborers, and
- Building supply stores.
A mechanic’s lien in SC may apply to any individual or any type of business if the statutory requirements are met.
Materials Must be Incorporated into the Structure or Become Fixtures
For a mechanic’s lien to exist based on material furnished, the materials must have been incorporated into the structure or have become fixtures.
For example, in Kitchen Planners v. Friedman, the SC Court of Appeals did not recognize a mechanic’s lien where the contractor ordered materials (cabinets) but never delivered them to the customer. You cannot claim a mechanic’s lien in materials that are sitting in your shop. Even if the materials are delivered, there is no mechanic’s lien unless the materials are actually used in the construction.
What is the Process for a Mechanic’s Lien in SC?
As the Court noted in Kitchen Planners, “[W]hen the labor is performed or material is furnished, the right exists but the lien has not been perfected.”
If the statutory requirements are not strictly followed and the deadlines for filing notices are not met, the lien is not perfected, and the court will not order payment or allow foreclosure on the lien.
What are those requirements?
Notice of Project Commencement
To protect the rights of contractors, subcontractors, and material suppliers, a Notice of Project Commencement must be filed with the clerk of court or register of deeds that contains:
(1) the name and address of the person filing the notice of commencement;
(2) the name and address of the owner or developer;
(3) a general description of the improvement; and
(4) the location of the project.
A “location notice” should also be posted at the job site that says, “The contractor on the project has filed a notice of project commencement at the county courthouse. Sub-subcontractors and suppliers to subcontractors shall comply with Section 29-5-20 when filing liens in connection with this project.”
Notice of Furnishing Labor and Materials
Subcontractors and material suppliers must serve a Notice of Furnishing Labor and Materials on the general contractor by certified mail that includes:
(1) the name of the sub-subcontractor or supplier who claims payment;
(2) the name of the person with whom the claimant contracted or by whom he was employed;
(3) a description of the labor, services, or materials furnished and the contract price or value thereof. Materials specially fabricated by a person other than the one giving notice and the contract price or value thereof shall be separately stated in the notice;
(4) a description of the project where labor, services, or materials were used sufficient for identification;
(5) the date when the first and the last item of labor or service or materials was actually furnished or scheduled to be furnished; and
(6) the amount claimed to be due, if any.
Notice of Mechanic’s Lien
Although you have a mechanic’s lien automatically, it is not perfected until you file a Notice of Mechanic’s Lien – which must be done within 90 days after completion of the work.
What happens if you don’t file the Notice within 90 days?
In Kitchen Planners, the Court of Appeals held that, where a contractor filed their Notice of Mechanic’s Lien 91 days after the completion of work, they did not have a mechanic’s lien and could not foreclose to collect the money they claimed was owed to them.
The lien must be accompanied by:
…a statement of a just and true account of the amount due him, with all just credits given, together with a description of the property intended to be covered by the lien sufficiently accurate for identification, with the name of the owner of the property, if known, which certificate shall be subscribed and sworn to by the person claiming the lien or by someone in his behalf and shall be recorded in a book kept for the purpose by the register or clerk who shall be entitled to the same fees therefor as for recording mortgages of equal length.
Like the time limits and other requirements for each Notice that must be filed, this requirement is strictly construed – if you do not serve the statement of account within 90 days after completion of work, the lien is considered dissolved and you can no longer foreclose on the property.
Foreclosure of Mechanic’s Lien
You’ve filed all the required notices, served all appropriate parties, and you’ve done it all within the deadlines. You still haven’t been paid, what now?
You must file a petition asking the Court to foreclose on the lien within six months of the completion of the work or the last day materials were provided. If you have met all requirements to perfect your mechanic’s lien within the time limits, the Court will then issue an order that the property should be sold, and you should get paid from the proceeds…
Notice of Pendency of the Foreclosure Action
A Notice of Pendency of the Foreclosure Action must also be filed and served within six months after completion of the work, or the lien will be dissolved.
As a practical matter, your debt may get paid at any point in this process, and, before filing the foreclosure action and notice of pendency, your attorney may send a notice of intent to file a foreclosure action to the property owner – putting them on notice that you have complied with the statutory requirements and you are about to foreclose on their property if they do not pay their debt…
Do You Need an Attorney to Perfect a Mechanic’s Lien?
Often, contractors and subcontractors file their own mechanic’s liens and notices. Many contractors, subcontractors, and material suppliers also do not get paid because they missed a deadline or did not include the information in their notices that is required by SC’s mechanic’s lien laws.
For most contractors and subcontractors, we recommend that you consult with your business law attorney – there are additional requirements that we have not discussed in this blog post and there are also defenses that the property owner is sure to raise once they consult with their attorneys.
Your attorney can help you to:
- Perfect your mechanic’s lien,
- Negotiate with the property owner or their attorneys to get you paid,
- File a foreclosure action to force the sale of the property, and
- Explore other options to collect your debt such as a civil suit for breach of contract.
What Happens if You File a Frivolous Mechanic’s Lien?
SC Code Section 29-5-15 provides penalties for filing a frivolous mechanic’s lien.
1) A contractor who is required by law to be licensed or registered must include their contractor license number or registration number on the lien document; and 2) any contractor who files a frivolous lien can be fined up to $5000, lose their contractor license, or both.
SC Business Law Attorneys in Myrtle Beach and Conway, SC
At Coastal Law, our Myrtle Beach business law attorneys are prepared to help you perfect your mechanic’s liens and collect debts owed to you by property owners, and we also help property owners to defend against frivolous mechanic’s liens or debt collection efforts.
Call Coastal Law now at (843) 488-5000 or contact us through our website for a free consultation about how to protect your business and your assets.
