Construction and related companies may work for weeks or even months on a project before receiving full payment. To secure payment, labor companies and suppliers can take a security interest in the project in the form of a mechanic’s lien. An Indiana mechanic’s lien helps contractors and those working with them secure payment for work performed or materials supplied by giving them an interest in the real property itself, but only if they follow the mechanic’s lien statute with particularity.
An Indiana Mechanic’s Lien Helps Secure Payment
It is common practice for a contractor, subcontractor, mechanic, journeyman, or laborer to begin performing a job after receiving only a down payment. After completing the work, the contractor then submits a final invoice for the remaining cost of the project, such as materials and labor that the down payment did not cover. But what happens if the customer can’t pay or refuses to do so? The Indiana mechanic’s lien statute provides a way for contractors to protect themselves for any work they do or materials they supply and to encourage clients to pay their bills.
Overview of Mechanic’s Liens in Indiana
Mechanic’s liens can help secure payment for work on a wide array of projects. Indiana Code § 32-28-3-1 of the Indiana mechanic’s lien statute lists those who may file a mechanic’s lien and the type of property they may do so on. Generally, a contractor, subcontractor, mechanic, or lessor of construction tools and equipment used on a project may file a mechanic’s lien for any of the following:
- The erection, alteration, repair, or removal of a house, building, bridge, reservoir, system of waterworks, or other structure;
- The construction, alteration, repair, or removal of a sidewalk, well, drain, drainage ditch, sewer, cistern; or
- Any other earth moving operation.
The lien may be placed on any of the following:
- Drain; or
- Other structure that the contractor erected, altered, repaired, moved, or removed.
Lessors of equipment and tools may place a lien on the same items or any other machinery on which its tools and equipment were used. The lien may, alternatively, be placed on the parcel of land on which the structure or improvement stands, or with which the structure or improvement is connected.
Filing a Mechanic’s Lien in Indiana
Under Indiana Code § 32-28-3-3(a), a mechanic’s lien must be filed by a sworn statement and notice intent to hold a lien on the property for the amount of the claim in the recorder’s office of the county where the property is located. This notice must be filed no later than 90 days after completion of the work on the property. However, the time limit for filing a mechanic’s lien for any work done on any Class 2 structure—a townhouse or structure that contains only one or two dwelling units, garage, barn, or family swimming pool—is within 60 days of completion.
Enforcement: Foreclosing on an Indiana Mechanic’s Lien
In Indiana, a mechanic’s lien is generally effective for one year from the date notice of the lien was given. The lien may be enforced by filing a complaint in the circuit or superior court of the county where the property is located. Under Indiana Code § 32-28-3-6, if the lien is not enforced within one year, it becomes void.
In cases where a complaint is timely filed, a court may direct for sale of the land and building to satisfy the mechanic’s lien and costs. This process is call foreclosure. A sale to satisfy a mechanic’s lien does not encumber the right of any previous encumbrance or an owner or other person not party to the action. If you recover “any judgment” in enforcing a mechanic’s lien, Indiana Code § 32-28-3-14 entitles you to recover the cost of your attorney’s fees as well. The Indiana Court of Appeals has held that the mechanic’s lien award of attorney’s fees is mandatory and must become part of the mechanic’s lienholder’s judgment on the property.
Credit to extend the time for filing is available for some lienholders, but such credit must be in writing, signed by the lienholder and all owners of record, and must be recorded in the same manner as the original statement and notice of intention to hold a lien. The credit must also be filed no later than one year from the date the original lien was filed.
Do You Need to File or Enforce a Mechanic’s Lien?
An Indiana mechanic’s lien is an important tool for contractors, subcontractors, mechanics, and other workers in the Hoosier State to ensure payment for services rendered. There are, however, several steps in the process which might void the lien entirely if not done correctly. Your Indiana mechanic’s lien lawyer should be experienced in both filing and enforcing mechanic’s liens, and you’ll find such lawyers at Camden & Meridew, P.C. To set up an appointment, call us today at (317) 770-0000 or complete our online contact form.