How Do I Lien for Tenant Improvements?
By Alex Barthet
When doing work for a tenant, what rights do you have regarding placing a lien on tenant improvements? Not many, especially if the landlord/owner has incorporated lien prohibitions within the lease document.
As any construction expert will tell you, a lien is a legal claim of one person upon the property of another to secure the payment of a debt. If you’re doing work for a tenant, you are aware the tenant doesn’t own the property, and therefore your lien doesn’t attach to the real property.
Let’s make it concrete. Say you are building out a restaurant in a strip mall or an office in a high-rise building. If the tenant contracts for the work, then whether you are a supplier to the electrician or the electrician, your lien most likely attaches only to the tenant’s interest. That interest isn’t ownership – just the right to possess that space in exchange for rent. And that can do little to satisfy your need to get paid.
So how should you handle safeguarding yourself when doing work or providing materials to a tenant? First off, follow the following 5 rules precisely to secure your lien rights.
- Send any notice no later than 45 days from your first work or delivery to the project.
- Record your claim of lien no later than 90 days from your last work or delivery to the project.
- Ensure all interested parties are served within 15 days of the recording of the lien.
- Serve a contractor’s final affidavit no later than five days before you foreclose on the lien.
- File a civil action to foreclose on the lien no later than a year from the recording date of the lien.
Calculating these dates correctly can be less of a burden with Calc-U-Lien. It’s an app downloadable on your IOS or Android device that does the counting and remembering for you.
If your work in a project would be such that you have to secure lien rights in the landlord’s ownership interest in the property, the same five points listed above apply. But there’s more to do as well.
The terms of the tenant’s lease impact you as a contractor, subcontractor or supplier. Your lien will only attach to a landlord’s interest in the property if the work being performed is at “the pith of the lease.” Here’s what that means. Often when a landlord contracts with a tenant, it’s basically “You pay me rent, and in exchange