As most contractors know, almost every construction project requires retainage to be withheld. Because retainage amounts can differ, it is critical to determine the retainage amount at the beginning of the project. On substantial-sized projects, this retainage can be over $100K by the time the contractor has finished its work. What is more troubling is the fact that retainage is often held until the end of the project, not when the contractor finishes its scope of work. While this small detail may not seem big for a finish contractor, this is certainly a huge deal for a site contractor or any other contractor who performs work at the beginning of a project. Often, retainage can be held up for months or even years which can cause issues. Since retainage is often a substantial amount of money, it is essential to discuss how to protect your right to your retainage.
Hopefully, all contractors know that when the owner or general contractor does not pay, a powerful tool is available. This tool is the Mechanic's Lien. The Mechanic's Lien is a statutorily created tool that allows a contractor or vendor to place a lien on the project's real estate. The lien is significant because it places an encumbrance on the real estate, and the owner cannot sell or refinance the real estate with the Mechanic's Lien.
While the Mechanic's Lien is a powerful tool, it must be utilized correctly. As it relates to retainage, the issue that comes up over and over is the sixty (60) day requirement for filing a Mechanic's Lien. Many contractors assume they cannot file a Mechanic's Lien if the only money outstanding is retainage. This is not true. Sometimes it becomes more important to file a Mechanic's Lien for outstanding retainage if the work performed was at the beginning of the project. Contractors often assume retainage is coming and do not realize that there is a problem with retainage until it is well past the sixty (60) day limitation for filing a Mechanic's Lien.
While the statute allows a Mechanic's Lien for retainage, the contractor must review its contract before filing a Mechanic's Lien. Often, the contractor's contract will mandate that no lien be filed on the project, and if a lien is filed, then the contractor must bond over it or have it removed. Therefore, it is essential to review this with a good Construction lawyer and discuss how to file a Mechanic's Lien for retainage while not violating any contract.
In summary, all contractors must remember that they have a tool for collecting outstanding retainage, the Mechanic's Lien. While the Mechanic's Lien is a valuable tool, it must be utilized correctly, which means filing it in a timely manner. Attorney Steven A. Brown, with Indiana Construction Lawyers, frequently helps guide his clients through retainage issues. With proper discussions, Attorney Steven A. Brown helps his clients protect their interests while making sure they do not violate any contract. Contact Attorney Steven A. Brown to discuss your construction project and how to make sure you protect your retainage.
Disclaimer: This article is not meant to provide legal advice. Always contact a lawyer to discuss your specific issues.
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