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What happens if we submit a lien claim less than 30 days after sending the notice of intent to lien?

We know that a company we worked for has gone into bankruptcy. We've submitted our invoice without any response. In fact, the email is not working. Today we submitted the notice of intent to lien, however we'd like to lien the property before it is sold. What are the implications if we submit a lien before waiting the customary 30 days?

3 replies

Feb 4, 2020

Wisconsin requires a Notice of Intent to Lien to be provided by all parties who plan to file a mechanics lien, and may be filed at any time after the labor and/or materials have been furnished to the project. This notice must be served at least 30 days prior to the filing of the mechanics lien. If the NOI is provided late / or the lien is filed early (i.e. less than 30 days elapse between the date of the NOI and the recording of the lien claim) it is fatal to a subsequent lien claim. Note, however, that since liens attach to the property itself, the bankruptcy of an interested party, or the sale of the property prior to the filing of the lien are not necessarily bars to recovery, or even bars to a lien claim. The general rule (subject to exceptions) is that, if a mechanics lien has attached (i.e. work has already begun on the property), and the required notices to retain the ability to lien are sent, a lien may be filed after the property is sold, and the property and new owners remain responsible. In a case where an innocent third party purchases the property, they will generally be liable to satisfy the lien claim and will need to seek recovery from either the original owner, or, potentially, the title insurance company. Likewise, bankruptcy claims are generally not a bar to mechanics liens. If the lien has attached, the Bankruptcy Code does not forbid a mechanics lien creditor who performed work and/or supplied materials prior to the filing of the bankruptcy petition from filing a lien after the bankruptcy was filed. Since, in most states, the mechanics lien right attaches when the work is performed, this means that if the work was initiated prior to the bankruptcy filing, a mechanics lien based on that work may be filed (perfected) after bankruptcy has been filed without violating the automatic stay.

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Feb 4, 2020

Thank you, one last question: Even though we are allowed to place a lien after the sale has been made - what compulsion is there to pay? Couldn't the new owner leave the lien on there for years if they have no intention of selling the property?

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Feb 4, 2020

The compulsion to pay remains the same no matter who owns the property. The ultimate power of a mechanics lien comes from the ability to enforce the lien, and foreclose on the property and force its sale to satisfy the debt. An enforcement action is a full-blown foreclosure lawsuit, and if the debt is not paid, the property can be forced to be sold to satisfy the mechanics lien debt, and other encumbrances to the property like a mortgage. Any amount remaining after the encumbrances have been satisfied would go to the property owner. As a practical matter, property is rarely auctioned to satisfy mechanics liens, as the property owners (or other interested parties) generally just pay rather than lose the property. All mechanics liens eventually expire if an enforcement action is not initiated within a certain period of time (if the lien is not paid prior to enforcement becoming necessary). In Wisconsin, an enforcement action must be initiated within 2 years from the filing of the lien, or the lien expires and becomes unenforceable.

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