Liens are statutory rights to encumber real property as a method of forcing payment for goods or services provided to the property owner to improve the real property. Liens have nothing to do with professional liability exposure, but we often get questions about whether they can be effective as a way to make sure professional service fees are paid. With design-build’s prevalence as a project delivery system, we get questions about whether a design firm can file a lien against an owner’s property even though the design services are not being provided directly to the owner.
Lien rights, and the procedures to establish and enforce the lien, vary by states and other jurisdictions. Not every jurisdiction gives lien rights to design firms. Liens were enacted into law to protect those workers and material suppliers who have little recourse if they are not paid for the work or materials provided. A lien makes the property difficult to sell or borrow against unless the liens are removed by payment.
In those jurisdictions where design firms are given the right to file a lien, design firms providing services to a design-builder such as a contractor or developer still have the right to encumber the project owner’s real property if they are not paid. Filing a lien is not easy –laws vary on timing, notice requirements, and procedures. And contractually speaking, design firms often are required to waive any lien rights they might have. If a firm is providing services to a design-builder, it might want to use lien laws to give it leverage to get its fee paid by its client, the design-builder.