If someone owes your business money, writing a letter of intent to lien can help you get your payments quickly. However, even small mistakes in the notice can keep you from receiving your money. Be sure you know how to craft this letter effectively.
A notice of intent to file a lien, or NOI, alerts a debtor that you have plans to take legal action to recover the money that he owes. One common type of notice is for a mechanic's lien. Despite the name, this type of claim has nothing to do with cars. Instead, it helps protect construction businesses.
If you were the contractor or subcontractor on a project and have not received timely payment, you may want to write an NOI. Although it may seem counterintuitive, even subcontractors who never spoke with the homeowner must file these liens and notices with the homeowner. In either case, the letter simply states that you intend to file a lien against the home if you do not receive payment in a certain time frame.
Lenders who provide loans for cars and homes can also use liens and notices to collect payment. Furthermore, if you won a settlement against someone in court and that person refuses to pay, you may be able to file an NOI.
Some people may think it's better to just file the lien and let the debtor deal with the consequences. However, it's often better to take the extra step and send a letter. In Arkansas, Colorado, Connecticut, Louisiana, Missouri, North Dakota, Pennsylvania, Wisconsin and Wyoming, claimants must submit notice before filing a lien.
Even if you live in one of the other states or territories, you should consider writing an NOI before officially submitting a lien. After all, just the letter itself can be intimidating enough to get debtors to pay. If you can get the money you need without involving lawyers, courts or property deeds, that's a great deal.
Zlien reports that 47 percent of NOIs get people to pay within 20 days without the collector taking any further action. If you extend the time to pay to 90 days, you could see a 90-percent success rate.
Timing is of the essence when it comes to sending NOIs. If you are in a state that requires these notices, the state also has a time limit for when you can send these notices. Other states also require you to send NOIs within a certain time frame if you want to send one at all.
For example, New Jersey does not require commercial construction companies to send a letter before filing liens. However, if you take either action, you must do so within 90 days of the final date you contributed to the projects.
While you have to make the claim within a certain time frame, you should send your NOIs earlier. In the New Jersey example, you could send the notice about two months after you finish the project. This gives you time to collect the money if the notice works before you need to file the lien.
When you know why you're sending an NOI and you know that you have the time to file, write the letter as soon as possible. First, be sure that the letter and not just the envelope bears the debtor's name and address. You should also date the letter in the heading. The body of the letter should be specific and concise. Be sure to include the relevant information:
- Who you are.
- The services or materials you provided.
- The last date you provided the services or materials.
- How much payment should be.
- The date on which you will file a lien if you do not receive payment.
- How the debtor should pay.
Try not to include any information that is not relevant to the lien. Rude language or threats outside of the impending lien can work against you in the long run. As you write, imagine a lawyer reading your words out loud to a judge and jury. If the case goes far enough, this could happen.
Finally, sign and print your name. You may also include your company's contact information below your signature. Some people choose to send these notices as certified letters. If you do this, the receiver has to sign for the letter, and you receive confirmation of receipt.