Coldwell Banker - Michele Dempster 808-283-4138 / 1-866-717-MAUI

PRELIEN NOTICE

Hawaii does not require a prelien notice to be sent out before the filing of a mechanic’s lien. Many states require such a notice in the beginning of the project so that owners and general contractors know exactly who is on the site and the general nature and extent of potential claims. Hawaii’s statutory scheme does not require any such notices at the beginning of the project.

MECHANICS’ LIENS

Important Introduction: Unlike other states, you cannot simply go out and file or record a mechanic’s lien, even if monies are owed to you. Before you have the right to record a mechanic’s lien, you must secure court permission. To do this, you file a “mini lawsuit” in the form of an Application for Mechanic’s Lien addressed to the court. A hearing is then set to determine whether you have probable cause to move forward with your lien. Because you are dealing with a court proceeding, it is recommended you seek competent legal advice from the beginning in the perfection of your lien rights.

The lien application as well as the notice and demand must be filed within 45 days of the filing and publication of a Notice of Completion and Affidavit of Publication, both of which are filed by the owner or general contractor. Unlike some states which have different time deadlines for the general contractor as well as the subcontractors and suppliers, everyone entitled to a lien has the same 45-day requirement.

The benefit of the Hawaii statutes is that you know exactly when the 45 days begin. As stated above, it starts after the Notice of Completion and Affidavit of Publication are filed with the clerk of the circuit court where the property is located and published in a newspaper of general circulation. The notice is published twice, 7 days apart, in such newspaper which is printed and published in the county where the project is located.

The Notice of Completion is only allowed is there has been “substantial completion” of the project. That usually occurs when the project can be used for its intended purpose. The project is considered complete even though there are small or trivial punchlist items. And, if an owner actually accepts the project, it is strong evidence it has been completed. If the contractor performs “call back” provisions, namely, fixing what he or she has already performed, this will not extend the completion date.

The Notice of Completion can also be filed and published after the abandonment upon the property. This is harder to define and you should seek legal advice in this regard.

If the owner or general contractor does not file and publish the Notice of Completion within one year of the actual completion or abandonment, the courts consider completion to be one year after the actual physical completion of the project. In other words, in this case, each lien claimant would get one year plus 45 days after the actual physical completion or abandonment.

How to Serve:

The lien application, as well as the notice and demand, if you

are a general contractor, must be served upon the owner. If you are subcontractor or supplier, they have to be served on both the owner and the person with whom you have a contract. When you file these papers, the circuit court will set a return hearing date which is not less than 3 nor more than 10 days after service. You are to serve these documents immediately.

Few courts will accept the fact that you served these documents 1 or 2 days before the actual hearing . Since this is a court process, it is highly recommended that the documents be personally served by a sheriff or police officer, or alternatively, a process server. You should seek legal advice if you have any further questions. If you cannot serve these people, the documents may be posted at the project. If the property is owned by two or more people, service on one of the co-owners is considered service on all.

After serving the papers, a hearing will be held in court before a circuit judge to determine whether there is “probable cause” for the mechanic’s lien. If no one contests your request, the court will generally approve the lien on the spot. If the lien is contested, the court usually sets a further hearing to hear evidence from both sides. In the meantime, you conduct discovery.

At the further contested hearing, the court determines whether there is a reasonable likelihood that you will be successful on your claim and if so, the lien is allowed. But remember, even if you win at this hearing, you must still put on your full case later at trial in your foreclosure action. The fact that the judge has sided for you at the probable cause hearing does not mean you will win at the trial.

Lien Release

Bond: The owner can secure a surety bond or a cash deposit for twice the amount of the mechanic’s lien. If this happens, the lien is released and you have a cause of action against this deposit or bond. Read this full article

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