A contractor sometimes believes that once the lien is filed, they are home free for getting paid. Unfortunately, that is often not the case. There are always concerns about whether the owner has sufficient funds to pay the contractor and subcontractors. Obviously, that is why the lien was filed. There are also concerns about whether there is any equity in the property to satisfy the liens. But, even if you file a lien, there still remains the question of proving the amount of your lien. This is where a number of contractors fall short.
When a lien is filed, the contractor need only have a good faith basis for the amount of the lien. But, once the contractor pursues foreclosure of the lien, it must then present specific proof supporting the amount of the lien. The documents necessary to prove the amount owed will vary, but will likely include invoices, timesheets and pay records for employees, and any other documentation supporting internal costs. As you can guess, supporting internal costs associated with the project can be very difficult. How do you prove that an employee spent 6 of her 40 hour work week on a particular project? Do you have a signed change order for that additional work the owner asked for?
Of course, the amounts alleged to be owed will be challenged by opposing counsel. And, if your documentation of expenses is not very good, it will be more difficult to prove the amount of your lien.
If you do decide to foreclose on a construction lien, I recommend that you closely review your documentation to make sure you can support the amount. If you have questions about the documentation necessary to support your construction lien, feel free to give me a call.
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