Indiana
Construction Lending State Compliance Library
State statute reference
Last updated May 22, 2023
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Indiana Construction Lien Law
Lien Law Overview
Indiana’s entire mechanics lien law is based on a distinction between residential and commercial property.
In Indiana, all mechanics liens created “relate back to the date the mechanic or other person began to perform the labor or furnish the materials or machinery.” Mechanics liens have priority over all liens created after it, except the liens of other mechanics and materialmen or, where the property is not residential or a utility property, a prior recorded mortgage.
Indiana Mechanics Lien Law is unique in that it is split into two classes: one for residential and utility property and the other for all other types of property (“Commercial”). If the contract is for the construction of a 1 to 2-family dwelling or certain public utilities, any lien filed is governed by the residential provisions of the statute. Projects not fitting into the residential category are governed by separate rules for Commercial property.
“Public utility property” means property owned or used by a public utility company. 50 IAC 5.1-1-22
“Residential Property” means property residential construction of a 1 to 2-family dwelling as projects not fitting into the residential category are governed by separate rules for Commercial Property.
Lien Waivers
Lien Waiver Summary
Indiana does not provide statutory forms for mechanics lien waivers and releases. Its important to control which lien waivers are used on a project and review them to make sure that the waiver does not contain language that can increase the risk to the owner or lender.
Note, that a provision in a contract to waive a right to a lien or a payment bond before the person is paid is void.
Statutory Form
Not Required
Notary
Not Required
Electronic Signature
Acceptable
Are title companies required by law to manage construction loan disbursements?
No, but title companies are insurance companies that may require -in exchange for insurance coverage – some level of control over how loan proceeds are disbursed. If they do, the lender either must comply with the title company’s demands or risk not having coverage for the loan (or try another title company, but they tend to share best practices by location/region).
Can a mechanics lien have priority over a pre-existing mortgage in Indiana?
Residential. Generally, by statute, any mechanics lien filed on a residential project will have priority so long as work has begun by a lien claimant before the date the mortgage is filed. Indiana courts, however, have held that the lien of a construction mortgage has “parity” with a mechanics lien. In one case, it was held that if a potential lien claimant does not have notice of the existence of the mortgage and both starts and completes work before the recording of the mortgage, then the mortgage holder may not be entitled to parity with the competing mechanics lien. In the situation where the mortgage is recorded before the work begins by any of the lien claimants, the construction mortgage may be entitled to priority over the mechanics lien; but the law on this issue is confused with seemingly inconsistent decisions of the courts on record. From a practical perspective, this means that the recordation of the mortgage before the work begins has some significance.
Registered professional engineers, registered land surveyors, and registered architects may secure and enforce the same lien that is given to contractors, subcontractors, mechanics, journeymen, laborers, and materialmen under IC 32-28-3 and any statutes that supplement IC 32-28-3. (See IC 32-28-11-1)
Commercial. A commercial construction mortgage has priority of all mechanics liens recorded after the mortgage is recorded to the extent of the funds owed to the mortgage lender for the specific project the liens are upon.
Notices
Notice of Commencement (or similar like event)
No.
Preliminary Lien Notifications
A preliminary lien notice is known as a Notice of Intention to Hold a Lien, and must be filed as strictly provided by Indiana Code 32-28-3-3, which provides that a person who wishes to acquire a lien upon the property, whether the claim is due or not, must file in duplicate a sworn statement and notice of the person’s intention to hold a lien upon the property for the amount of the claim.
In Indiana, preliminary notice is only required for residential construction. Ind. Code Ann. § 32-28-3-3. Preliminary notice must be given 60 days from first furnishing work on new construction and within 30 days on renovation projects. Ind. Code Ann. § 32-28-3-3.
In Indiana, a mechanic’s lien for residential projects must be filed within 60 days of furnishing labor or materials. Ind. Code Ann. § 32-28-3-3(b). A mechanic’s lien for nonresidential projects must be filed within 90 days from the last day the claimant provided materials or labor. Ind. Code Ann. § 32-28-3-3(a).
Since preliminary lien notices must be recorded lenders can have awareness by performing title searches or requesting mechanics lien endorsements to the title policy to help identify liens and potential liens.
Notice of Completion
No.
Title
Indiana uses ALTA title commitments that allow for the Construction Loan Update Endorsement, which is used when the lender requests endorsements as additional disbursements are made. It gives coverage up to the new outstanding mortgage balance and shows whether any other instruments have been filed and recorded since the last title update. The endorsement also ensures the priority of the insured mortgage over instruments that are not specifically listed in the endorsement. Since the title company has a stake in the disbursements, you may find that they exercise some due diligence relating to construction draws.
Contractor Licensing
Indiana has no statewide license requirement for contractors, but each municipality may have licensing requirements. Some specialized contractors, such as plumbers, have statewide licensing requirements. See, for example, the following from Indianapolis. https://www.indy.gov/activity/contractor-licenses
Have Questions?
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