A big part of working in the construction business involves dealing with payment delays and disputes. Fortunately, the construction industry allows contractors, subcontractors, and material suppliers to file a mechanics lien, which is arguably the most powerful remedy to recover payment from delinquent clients.
Once you record a mechanics lien against a property, you essentially attach a note to that property that warns potential buyers and financiers about the outstanding debts associated with it. A mechanics lien can, therefore, prompt payment from property owners who do not want to limit their property’s resale value.
Filing a mechanics lien is a very effective way to receive payment – the tricky part, however, is recording your lien properly. Lien laws in Tennessee are fairly complicated, especially with regard to pre-lien requirements and document deadlines. A small mistake can nullify your lien rights, so you must be very careful when you decide to file a lien on your own.
This guide will show you in detail the key steps that you must take when filing a mechanics lien in Tennessee.
Who can file a mechanics lien in Tennessee?
All construction professionals who provide labor, materials, and other services for the purpose of constructing, repairing, or improving a permanent building or structure have a right to file a mechanics lien in Tennessee.
Contractors, subcontractors, and material suppliers may file a mechanics lien, as well as architects and designers. Construction parties who have a direct contract with a property owner are considered direct claimants, while those who do not have any direct contractual obligation with an owner are indirect claimants.
Both direct and indirect claimants may exercise their lien rights to recover payment in case a payment dispute arises during or after the course of a project.
Are pre-lien notices required in Tennessee?
Yes, certain construction parties are required to serve pre-lien notices to protect their lien rights.
There are different pre-lien notice requirements in Tennessee, depending on your role in the project. These notices are served for different purposes, but you must ensure that you are able to submit them, especially if you are required to do so.
For general contractors and other parties with direct contact with the employers
Construction participants that are in direct contact with the property owner are NOT required to serve a preliminary notice. However, if you are working on a residential property, you must serve a Notice to Owner before commencing work on a property.
The Notice to Owner is served on the property owner(s) by personal delivery or by registered mail.
The Notice to Owner must also be in substantially the following form:
Delivered this __ day of _________ , 20 ___ , by ___________________ , Contractor.
The above-captioned contractor hereby gives notice to the owner of the property to be improved, that the contractor is about to begin improving the property according to the terms and conditions of the contract and that under the provisions of the state law (§§ 66-11-101 66-11-141):
(1) There shall be a lien upon the real property and building for the improvements made in favor of the contractor, mechanic, laborer, founder or machinist, who does the work, or furnishes the materials for such improvements for a duration of one (1) year after the work is finished or materials furnished;
(2) Except as modified by § 66-11-146, every person contracted with or employed to work on the buildings or to furnish materials for the same with the above-named contractor shall have a lien on the property for that person’s work or material; provided, that such person notify the owner in writing within ninety (90) days after the completion of the improvement, which lien will continue for ninety (90) days after such notice;
(3) Except as modified by § 66-11-146, these liens can be enforced even though the contractor has been paid in full if the contractor has not paid the persons who furnished the labor or materials for the improvement.
____________________ Contractor
For subcontractors, material suppliers, and other construction participants
All subcontractors and materials suppliers, except those who are working on a residential property with four units or fewer, must serve a Notice of Nonpayment to preserve their lien rights.
NOTE: Construction participants with no direct contract with the general contractor and working on a residential project with four units or fewer are NOT qualified to file a mechanics lien.
The Notice of Nonpayment in Tennessee must be served on the property owner(s) and the general contractor within 90 days of the last day of each month within which labor or supplies have been furnished. The notice must include the following information:
- The name and the address of the claimant
- A general description of the work or supplies furnished to the project
- The amount owed as of the date of the notice
- A statement of the last date the claimant performed work or supplied materials to the project
- A description sufficient to identify the property in question
The Notice of Nonpayment may be in the following form, according to Tennessee Code Section 66-11-145(d):
TO:
[Contractor
[Owner]
contracting w/ Owner]
Pursuant to Tennessee Code Annotated, § 66-11-145, notice is hereby given that __________ [Lienor] has not been paid for certain labor, materials, services, equipment, or machinery it supplied in the __________ [description of work] of the __________ [description of project], located at __________ [description of property].
The amount presently due and owing is $__________. The last date labor, materials, services, equipment, or machinery were provided in connection with the improvements was __________[date]. You may send any communications regarding this matter to the following name and address: _________._________________________
LienorDated: _________________________
The Notice of Nonpayment may be served using the following delivery methods, per TN Code Section 66-11-108:
(1) Registered or certified mail, return receipt requested;
(2) Hand delivery, evidenced by a sworn statement, properly notarized, confirming delivery; or
(3) Any other commercial delivery service that provides written confirmation of delivery.
How to File a Mechanics Lien in Tennessee: 3 Simple Steps
1. Prepare the mechanics lien document
2. Record the mechanics lien
3. Enforce/release the mechanics lien
1. Prepare the mechanics lien document
The mechanics lien in Tennessee, also known as the Notice of Lien, must be in the form of a sworn statement containing the following information:
- The name of the claimant
- The name of the party with which the claimant is in contract
- The name of the property owner
- The date of the first and last day of work
- The amount of payment being claimed
The statement in the Tennessee mechanics lien may be in substantially the following form:
Must the Tennessee mechanics lien be notarized?
Yes, the Notice of Lien in Tennessee must be notarized before filing, as evidenced by the mechanics lien form shown above.
2. Record the mechanics lien
Once you have the mechanics lien document ready, you may now record your mechanics lien.
When should you record the mechanics lien?
Parties that do not have a direct contractual relationship with the property owner have 90 days after the completion or abandonment of the project to file the mechanics lien. Failing to file the mechanics lien within this 90-day time frame forfeits your lien rights.
Prime contractors are generally not required to record a mechanics lien to preserve their lien rights.
Where should you file the mechanics lien?
The Tennessee mechanics lien must be filed in the office of the register of deeds of the county where the real property is located.
Should you serve copies of the mechanics lien to the property owner after filing?
Yes, you should. The copy may be served on the property owner(s) via certified mail, with return receipt requested. The copy of the mechanics lien must be served on the owner before the 90-day lien deadline expires.
Can you file the Tennessee mechanics lien online?
Yes, you may do so via the Handle app. Handle can take care of all your paperwork to ensure that your documents, from your pre-lien notices to your actual mechanics lien, are filed on time.
Handle can also ensure that you are serving the correct pre-lien notices in Tennessee, and that your notices and your liens are filled out properly. If you’re in doubt about any of the requirements, Handle can sort out your questions and help you through the entire lien filing process.
3. Enforce/release the Lien
If no payment arrives after you have filed the lien, you must initiate a foreclosure lawsuit against the property. The mechanics lien expires 1 year after the recordation date, and parties in direct contact with the owner must commence foreclosure action before this 1-year window elapses.
Parties that do not have a direct contract with the owner only have 90 days after the recordation date to initiate the foreclosure lawsuit. If the property owner serves you a Notice to Commence Action to Enforce Lien, then your deadline to initiate lawsuit falls on the 60th day after you received this notice.
If you got your payment and the lien has been satisfied, you must release the lien by recording the release in the same office of deeds where you recorded the mechanics lien. You have 30 days after receiving a notice demanding release to file the lien release.
Failing to release the lien upon demand by the owner(s) may hold you liable for the lien-related damages incurred by the owner(s).
3 Common Mistakes When Filing a Mechanics Lien in Tennessee
1. Failing to submit the required pre-lien notices
The pre-lien notice requirements in Tennessee may be a bit confusing, especially because they are not all the same for all construction participants. If you are in direct contact with the owner, make sure that you have the Notice to Owner ready before you work on the project.
If you are a subcontractor or a material supplier, ensure that you have your Notice of Nonpayment ready before the deadline of service. These pre-lien notices are very important if you want to protect your lien rights.
2. Failing to file the notices and mechanics lien on time
The important deadlines must be kept track of at all times. Do not wait until the last minute to prepare and file the documents. Missing a deadline by even just a day can be fatal to your chances of getting paid, so always be on top of all the lien-related time frames.
The important deadlines to keep in mind are shown below:
3. Failing to enforce of release the lien
Mechanics liens are not valid forever, so make sure that you enforce the lien before it expires. Tennessee mechanics liens are valid for only 1 year after the recordation. If you don’t think you are going to get paid before the lien expires, you must initiate a foreclosure lawsuit.
Note that the deadline for initiating a foreclosure action is shortened to 90 days for subcontractors and other claimants with no direct contract with the owner. This time frame may also change to within 60 days if the owner serves you a Notice to Commence Action.
Releasing the lien, especially when it has been satisfied and when a written notice of request has been sent to you by the owner, is another key step. If you fail to release the lien, you might end up paying for the attorney fees and other damages incurred by the owner.
Further reading