Lien Law Online (http://www.lienlawonline.com)

Lien Law Online eLert for 1/26/2012 - Washington

2012-01-27T11:10:00.001-08:00

January 26, 2012

In a recent case, Williams v. Athletic Field, Inc., --- P.3d --- 2011 WL 4089927 (Wash. 2011), the Washington Supreme Court reversed a 2010 Washington Court of Appeals decision that found that in order for a Claim of Lien to be valid, it must contain a proper acknowledgement pursuant to Washington’s Real Property & Conveyance Act (RCW 64.08). The acknowledgement required under RCW 64.08 identifies specific language to be used and acknowledged by a notary, which varies depending on whether the claimant is an individual or a corporation. The decision of the Washington Supreme Court found that the form of lien provided in the lien statute itself (RCW 60.04.091(2)), although ambiguous, is sufficient to establish a valid Claim of Lien even if the document is not acknowledged pursuant to RCW 64.08.

The issue that the Washington Supreme Court resolved arose in the situation where a corporate claimant relies on the form of lien provided in the lien statute alone (relied on by most claimants), which does not satisfy the specific language requirements for acknowledgement under RCW 64.08. Nonetheless, 60.04.091(2) states, in relevant part, “a claim of lien substantially in the following form shall be sufficient.” However, RCW 60.04.091(2) also states, in relevant part, that the Claim of Lien “shall be acknowledged pursuant to RCW 60.08. The court recognized that the statute was ambiguous, as it could either be interpreted as 1) creating an exemption to the acknowledgement requirement, or 2) requiring the claimant to append a certificate of acknowledgment to comply with RCW 64.08. Given this ambiguity, the court liberally construed the statute as to allow the form of lien provided in RCW 60.04.091(2), standing alone, to be sufficient to establish a valid Claim of Lien.

Accordingly, the Washington Supreme Court’s decision establishes that corporations may rely on the Claim of Lien form provided by the lien statute. Although the decision did not specifically address whether the same rules apply to individuals filing a Claim of Lien, as RCW 64.08 has separate requirements for acknowledgement by individuals, it seems likely a court would use a similar analysis to validate the sample form in the context of individuals as well. This may be a question for another day, however, and prudent practice for individuals would be to follow the sample form provided by RCW 42.44.100(1) for purposes of acknowledgement, in addition to the sample form provided in the lien statute.

Jason R. Wandler, Esquire (Contributing Author)

Oles, Morrison, Rinker & Baker

Lien Law Online eLert for 1/17/2012 - California

2012-01-18T08:31:00.001-08:00

January 17, 2012

California’s legislature has revised California’ mechanics lien laws in an effort to modernize and simplify them. The majority of the changes are minor and are intended to be non-substantive, but there are a few key changes. These changes take effect on July 1, 2012. Below is a brief preview of the changes, which will be addressed in more detail in a revised California section of LienLawOnLine.

Much of the terminology regarding mechanics liens has changed. For example, under the new laws, “direct contractor” is used in place of the somewhat ambiguous “original contractor,” and is defined as “a contractor that has a direct contractual relationship with an owner.” Civ. Code § 8016. Similarly, “materialman” has been replaced with “material supplier.”

Under the new laws, all notice requirements have been standardized and relocated to a new subdivision. Civ. Code §§ 8100 – 8118. These sections govern the contents of notice, the manner of serving the notice, when notice is deemed complete, and proof of service.

The new laws create new waiver and release forms, which must be used. Civ. Code §§ 8120 – 8138.

The new laws make several changes with respect to completion. Under the new laws, “acceptance by the owner” is no longer included as a means of achieving completion. Civ. Code § 8180. Also owners will now have 15 days to record the Notice of Completion instead of the previous 10-day period. Civ. Code § 8182. Lastly, when there are multiple direct contractors, owners are now permitted to file separate Notices of Completion for each portion of the work. Civ. Code § 8186.

The new laws generally do not change the requirements of preliminary notice. However, under the new laws, direct contractors are required to give preliminary notice only to construction lenders. Civ. Code § 8200(e)(2).

Under Civil Code section 8424, mechanics lien release bonds are only required to be equal to 125% of the claim, rather than 150%, as they previously were.

The new laws provide a new procedure for judicially releasing liens, which was not previously included. Civ. Code § 8480. Included in these new procedures is a requirement that at least 10 days before petitioning for a release of lien the owner gives the claimant notice and demands a release of lien. Civ. Code § 8482. Additional new provisions include formal burden of proof requirements and the elimination of a cap on the recovery of attorney’s fees for petition for a release of lien. Civ. Code § 8488.

Deborah S. Ballati, Esquire (Contributing Author)

B. Scott Douglass, Esquire (Contributing Author)

Farella Braun & Martel, LLP

Lien Law Online eLert for 10/24/2011 - North Carolina

2011-10-26T07:30:00.000-07:00

October 24, 2011

Effective October 1, 2011 reciprocal attorney’s fee provisions are enforceable in all NC commercial contracts. That would include ordinary construction contracts. It would also include ordinary commercial contracts in addition to the narrow category of “written evidence of indebtedness” (i.e., promissory notes) for which attorney’s fee provisions have been statutorily enforceable for years.

There are many differences of opinion about contractual attorney’s fee clauses and whether they are desirable. Legally, however, in NC where enforcement was desired, it was most likely unavailable because NC does not enforce a mere contractual attorney’s fee provision without underlying statutory authority. Arguments that ordinary construction or commercial contracts fell within existing statutory authority usually failed. This new statute, attached, provides that authority.

It remains to be seen whether or not attorney fees that are contractually enforceable can be included in a lien.

Steven D. Hedges, Esquire

Sparrow Wolf & Dennis, P.A.

Lien Law Online eLert for 9/1/2011 - Texas

2011-09-13T12:31:00.000-07:00

September 1, 2011

This is a reminder that the significant changes in Texas's lien law recently enacted by the Legislature GOES INTO EFFECT TODAY, SEPTEMBER 1, 2011.

Details of the changes were set out in an e-Lert dated July 28, 2011. The e-Lert can be reviewed by visiting LienlawOnline under Industry News.

Gregory A. Harwell, Esquire (Contributing Author)

Gardere Wynne Sewell, L.L.P

Lien Law Online eLert for 7/28/2011 - Texas

2011-08-01T11:23:00.000-07:00

July 28, 2011

The Texas Legislature has made the following important changes:

Retainage Notice Requirements—HB 1390

The Legislature made significant changes to the means and timing to record a lien to secure payment of contractual retainage. Initially, prior to the passage of HB 1390, there were two, distinct types of retainage recognized under Texas law: (i) contractual retainage in prime contracts and subcontracts and (ii) a statutory opportunity for an owner to withhold 10% of the prime contract amount and create a “drop dead” date to file a lien. If this statutory retainage was withheld and no notices of indebtedness were sent from a claimant to an owner, an owner could release the remaining 10% on the 31st date after completion, relatively secure in knowing that it would not be liable to lien claims filed thereafter. These two, separate retainage concepts had separate provisions for notice and separate deadlines. Now, these concepts have been comingled.

Subcontractors and suppliers have two means to preserve the right to claim a lien for unpaid, contractual retainage. First, they can send notice letters as contractual retainage is withheld from their periodic draws. This process has not been changed. Second, they can now wait to the conclusion of their work scope and send notice of a retainage provision within 30 days of the completion or termination of their subcontract. However, the statutory change does not require the lien claimant to advise the owner of the amount of any contractual retainage, it merely requires notice that a subcontractual retainage obligation exists.

If timely notice is provided to an owner that a subcontract calls for retainage (timely meaning within 30 days after the subcontracted work is completed), the claimant can later file a lien to create a direct liability against an owner. The deadline to file the lien is a moving target, but generally ranges from 40 days after a notice of completion or a notice of termination is recorded by the owner on the entire project, to 4 months after completion of the entire project if no notices are recorded. The new HB 1390 also allows an owner to accelerate this lien-filing obligation by allowing an owner to send a written demand that the claimant file its lien (putting the claimant on a 30-day deadline to file). Unfortunately, the statutory amendment now comingles the notion of contractual retainage, statutory “safe harbor” retainage, and personal liability to an owner for debts – something that may require future legislative clarification or court interpretation to resolve.

Finally, the amendment now provides that if subcontractors have requested information of an owner during the course of a project (essentially information on completion, termination, or legal descriptions of the property), and the owner fails to provide the information in accordance with the statute, the deadline to file a lien to secure payment of contractual retainage reverts to 4 months after completion of the entire project.

The new retainage notice requirements will take effect on September 1, 2011.

HB 1456—Standardized Statutory Lien Waiver Forms

House Bill 1456 had two significant changes to existing Texas law. Initially, it prohibited the use of contractual waivers of lien rights for commercial construction projects. Further, it mandated the use of uniform statutory lien waiver forms, for both conditional and unconditional lien waivers. These are the forms to be used during the payment process on all construction projects in Texas. The residential construction industry can be exempted from the prohibition on contractual waivers of lien rights.

While the use of these standard, statutorily-worded lien waiver and release forms may reduce litigation and payment delays in the construction process, the primary goal of the statute was to invalidate contractual lien waivers and to preserve the rights of subcontractors and suppliers to file liens in the event of a failure of payment. If the lien waiver and release is not drafted and executed in a form that “substantially complies” with the language found in House Bill 1456, then it is not enforceable and does not create an estoppel or impairment of a lien or payment bond claim. However, if a subcontractor or supplier has actually been paid, a deficiency in a form would be irrelevant, as there would be no outstanding indebtedness for which a lien would be filed. In addition, this legislation prohibits a person from requiring a claimant to execute an unconditional waiver and release for a progress payment or final payment amount unless the claimant or potential claimant actually received payment in that amount in good and sufficient funds. The requirement for the use of the uniform statutory lien waiver and release language takes effect on January 1, 2012.

Mandatory Attorney’s Fees on Suit to Foreclose a Lien—SB 539

Prior to the enactment of Senate Bill 539, courts had discretion to determine whether to award costs and attorney’s fees to a successful party in a suit to foreclose on a lien or to enforce a claim against a construction-related bond. Senate Bill 539 amended the Property Code to make the award of reasonable legal fees mandatory for a successful lien claimant.

Gregory A. Harwell, Esquire (Contributing Author)

Gardere Wynne Sewell, L.L.P

Lien Law Online eLert for 6/23/2011 - Massachusetts

2011-06-27T09:28:00.000-07:00

June 22, 2011

Massachusetts passed a law amending the mechanic’s lien statute, which takes effect on July 1, 2011, and provides architects, landscape architects, professional engineers, licensed site professionals and land surveyors (collectively referred to below as “design professionals”) who are licensed or registered in Massachusetts with the right to obtain mechanics liens for the value of professional services. The amendments to the law apply to liens for professional services, as defined by the statute, for which any person has filed or recorded a notice of contract on an interest in real property on or after the effective date of the amendments. The amendments however do not apply to any mortgage filed or recorded before the effective date of the amendments. Prior to the new law, most architectural and engineering services were not afforded mechanic lien protection.

The following is a brief summary of the steps necessary for design professionals to obtain a lien:

(1) Have a written contract with the owner, lessee, or any one operating with the consent of the owner or lessee.

(2) Execute a Notice of Contract in the statutory form (Mass. Gen. Laws Chapter 254, § 2C) and file or record it in the registry of deeds for the county or district where the land is located no later than the earliest of 60 days after filing or recording the Notice of Substantial Completion (Mass. Gen. Laws Chapter 254, § 2A) or 90 days after the 1st tier design professionals or anyone performing professional services under him, last performed such services.

(3) File or record a Statement of Account within 30 days after the last day that a Notice of Contract may be filed or recorded.

(4) File a civil action with a verified complaint to enforce the lien within 90 days after the filing or recording of the Statement of Account. An attested copy of the complaint must be filed and recorded in the registry of deeds for the county or district where the land is located within 30 days of the commencement of the action.

There are special requirements applicable to 2nd tier design professionals working for 1st tier design professionals, including:

(1) A 2nd tier design professionals working for a 1st tier design professionals who has the right to file a lien, may file its own lien if it has a written contract and if the owner approves the lower tier design professionals subcontract in writing.

(2) The 2nd tier design professionals must follow the general process outlined above except that it must use a different statutory form for the Notice of Contract (Mass. Gen. Laws Chapter 254, § 2D) and give actual notice of the filing to the owner.

(3) The lien is limited to the amount owed by the owner to the 1st tier design professionals as of the time the 2nd tier design professionals records its Notice of Contract.

There are also special requirements for mechanics liens of lower tier design professionals working for contractors or subcontractors:

(1) The lower tier design professionals working for a general contractor or subcontractor may file a lien if it has a written contract for that work.

(2) The lower tier design professionals must follow the same process outlined above but with the Notice of Contract form provided in Mass. Gen. Laws Chapter 254, §4. The notice must be filed by the earliest of (i) 60 days after the filing of the statutory Notice of Substantial Completion; (ii) 90 days after the filing of the Notice of Termination or (iii) 90 days after the last furnishing of materials by anyone working under the general contractor. The owner must receive actual notice of the filing of the Notice of Contract.

(3) The amount of the lien is limited to the amount owed by the owner to the contactor as of the time the design professionals record its Notice of Contract.

(4) Additionally design professionals who do not have direct contracts with general contractors must serve a Notice of Identification in the statutory form within 30 days of commencing work or the amount of the lien will be limited.

Notably, the statute provides a lower priority to design professionals’ liens than contractor, subcontractor, supplier, and labor liens. The restriction does not apply to liens of design professionals hired by contractors or subcontractors.

Terri L. Pastori, Esquire, tpastori@peabodyarnold.com (Contributing Author)

Robert M. McCall, Esquire, rmccall@peabodyarnold.com (Contributing Author)

Peabody & Arnold LLP, www.peabodyarnold.com

Lien Law Online eLert for 6/21/2011 - North Carolina

2011-06-21T13:17:00.001-07:00

June 21, 2011

The North Carolina Bar Association submitted a proposed bill for introduction in the 2011 General Assembly session, developed by the NCBA’s Construction Section, and providing by revision and amendment of the statutory mechanics lien and bond laws for changes including the following:

• A notice of commencement, as currently used in several other states, to be filed by the project owner and serving to eliminate priority claims (so-called “hidden liens”) predating project commencement

• A notice to owner, to be served by subcontractors within 30 days of first furnishing as a prerequisite to perfecting a claim of lien and to avoid the effect of recent bankruptcy court decisions in NC disallowing post-petition perfection of liens

• Statutory and legally sufficient forms for partial and final lien waivers, avoiding the effect of a recent NC trial division decision construing a partial lien waiver to be a final lien waiver

• Retention of subrogated and direct-liability claims of lien against owners and retaining the claim of lien on funds

• A requirement that second and lower tiered bond claimants on public jobs provide the general contractor with a notice of subcontract as a prerequisite to a bond claim and to protect the GC against double payment liability

The bill was introduced as House Bill 489. After initial amendment, HB 489 was converted in its third version from the set of amendments and new provisions submitted by the NCBA into an act styled “An Act Authorizing The Legislative Research Commission To Study North Carolina's Mechanics' Lien And Bond Laws.” This study commission version was passed by the House and passed a first reading by the Senate. This is the current status of the proposed legislation. With the close of the current legislative session, further action on this bill is not anticipated this year.

Steven D. Hedges, Esquire (Contributing Author)

Sparrow Wolf & Dennis, P.A.

Lien Law Online eLert for 5/18/2011 - Utah

2011-05-18T12:58:00.001-07:00

May 18, 2011

During the 2011 Utah State Legislative session, the legislature made some significant changes to the Utah Mechanic’s Lien laws. There were two principal bills dealing with these changes: HB 115 “Mechanics’ Liens Amendments” and HB 260 “Mechanic’s Lien Revisions”. House Bill 115 has an effective date of May 2011. House Bill 260 has an effective date of August 2011. The following is a brief summary of the changes. The Lienlaw Online chapter has been updated with the changes associated with HB 115 and will be updated in August to reflect the changes associated with HB 260.

HB 115 – Mechanics’ Lien Amendments

• Provides for a new lien for “preconstruction services.” Preconstruction services include “plan or design” services provided before construction of the improvement commences. Compensation must be separate and apart from construction services compensation.

• Preconstruction services are deemed completed when the construction commences (likely when the first preliminary notice is filed with the State Construction Registry (“SCR”)).

• Requires all persons or entities to file a Notice of Retention (“retention” referring to one being retained to perform work and not to be confused with monetary retainage) in order to preserve preconstruction lien rights.

• Notice of Retention is required to be filed within 20 days of commencement of the claimant’s work.

• Information required in Notice of Retention: contact information of service provider; description of services being provided; identifying information of person/entity who hired service provider; identifying information of property owner including county and tax identification number.

• Provisions to challenge the validity of a Notice of Retention.

• Priority for all preconstruction service liens relate back in time to the filing of the Notice of Retention. Exception: a preconstruction services lien is subordinate to a loan to the extent preconstruction services are provided after the recording of the loan.

• Required to file preconstruction lien within 90 days after completing the services.

• Required to file lawsuit to foreclose preconstruction lien within 180 days of recordation of the preconstruction lien.

HB 260 – Mechanic’s Lien Revisions

• Changes to the mechanic’s lien law from this bill apply to all private projects which commence on or after August 1, 2011. Current law stays in effect until July 31, 2011.

• Eliminates the requirement for the filing of a Notice of Commencement with the SCR on private projects.

• Requires all persons or entities (including general contractors) to file a Preliminary Notice in order to preserve lien rights on private projects. Preliminary Notices are still required to be filed within 20 days of commencement of the claimant’s work.

• Adds additional information required to be included in Preliminary Notice (tax identification number(s) for each parcel where work is to be performed and the name of the county where the property is located).

• Requires the construction lender to file with the SCR a Notice of Construction Loan “promptly” after and “in conjunction with” the recording of the trust deed with the loan closing.

• Requires the construction lender to file with the SCR a Notice of Construction Loan Default within five days of the recording of a notice of default with county recorder.

• Requires all filings with the SCR to contain tax identification number(s) for the property.

• Establishes that the First Preliminary Notice filed with the SCR is deemed to be the first work for priority purposes and the relation back doctrine. First work will no longer be determined by actual work done on the property.

• Provides for the persons or entities who have filed a Preliminary Notice with the SCR prior to the recording of the trust deed to withdraw their respective Preliminary Notices at the request of the construction lender in order for the construction lender to be placed in first position for priority purposes.

• If a party has withdrawn its Preliminary Notice at the request of the construction lender, the party must re-file its Preliminary Notice within 20 days of the bank’s recordation of the trust deed to preserve its lien rights.

• Requires that the standardized building permit also include the tax identification number for each parcel of property for the project as well as the county within which the project is located.

• Requires the governmental entity issuing the building permit to transmit the building permit information to the SCR for filing for informational purposes only.

• Of note, while not dealing specifically with mechanic’s liens, government projects, as it relates to notice requirements for bond claims, will continue as currently constituted. Filing by owner or general contractor of the Notice of Commencement for the project is unchanged. Thereafter subcontractors and suppliers are required to file Preliminary Notices in order to preserve bond claim rights.

This material is provided for educational purposes and as a general reference only. It is not to be used or construed as legal advice. Due to the changing nature of laws, you should consult with an attorney for specific requirements or interpretations that may apply to your particular situation.

Brian J. Babcock, Esquire (Contributing Author)

Babcock Scott & Babcock P.C

Lien Law Online eLert for 2/10/2011 - South Carolina

2011-02-11T06:57:00.001-08:00

February 10, 2011

If you recall, South Carolina enacted recent changes to its Mechanic’s Lien statute to protect landscapers, where the value of the work exceeds five thousand dollars ($5,000) and the work was performed pursuant to a written agreement with the owner. The statute defines “landscaping service” fairly broadly, to include land clearing work, and states that the work need not be related to the actual construction or repair of a structure in order to be covered by the statute. South Carolina’s Supreme Court has now decided on a case involving landscaping services performed prior to the effective date of this new statute (S.C. Code §29-5-26), and South Carolina recognizes the existence of a mechanic’s lien for landscape and irrigation installation performed without a written agreement as well. Earthscapes Unlimited, Inc. v. Ulbrich, 703 S.E.2d 221 (S.C. 2010)

C. Allen Gibson, Jr., Esquire (Contributing Author)
James E. Weatherholtz, Esquire (Contributing Author)
Buist, Moore, Smythe & McGee, P.A.

Lien Law Online eLert for 2/10/2011 - New Jersey

2011-02-10T07:40:00.001-08:00

February 9, 2011

The New Jersey chapter has now been completely updated and includes all of the new statutory forms based on the amendments that were passed into law in January 2011.

Dennis A. Estis, Esquire Contributing Author

Steven Nudelman, Esquire Contributing Author

Greenbaum, Rowe, Smith & Davis LLP

Lien Law Online eLert for 1/12/2011 - New Jersey

2011-01-20T08:43:00.000-08:00

January 12, 2011

The Acting Administrative Director of the Courts of New Jersey recently issued a directive involving the proper venue for enforcement of private construction lien claims. Effective January 18, 2011, all actions involving private sector construction lien claims shall be filed solely in the Civil Part of the Law Division of the Superior Court of New Jersey. In the past, such actions were filed in either the General Equity Part of the Chancery Division or the Civil Part of the Law Division. Since the relief sought in private sector construction lien actions is monetary, these actions are most appropriately filed in the Law Division.

Public sector construction lien (municipal mechanic’s lien) actions shall be filed only in the General Equity Part of the Chancery Division as required by the Municipal Mechanic’s Lien Law (N.J.S.A. 2A:44-137).

Dennis A. Estis, Esquire Contributing Author
Steven Nudelman, Esquire Contributing Author
Greenbaum, Rowe, Smith & Davis LLP

Lien Law Online eLert for 1/9/2011 - New Jersey

2011-01-20T08:39:00.000-08:00

January 9, 2011

On January 5, 2011 New Jersey Governor Chris Christie signed into law a much needed revision to the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1 et seq. (“CLL”) for private construction projects. The amendments clarify various provisions of the statute and conform it to numerous court decisions interpreting the CLL:

•New Timing for Residential Construction Liens. Residential construction claimants now have 120 days to file a Notice of Unpaid Balance and Right to File Lien (“NUB”), arbitrate the claim, and record the lien.

•Multiple Liens Against the Same Residential Project. There are several new statutory provisions designed to avoid inconsistent arbitration awards on the same construction project.

•New Forms. New forms were created for the NUB, the lien claim, amended lien claim, form of affidavit used to summarily discharge lien claims and a standard form for the bond used to discharge a construction lien claim.

•New Definitions. These include:

o“Residential Construction” - A construction project which includes any residential units is deemed “residential” in nature.

o“Filing” - Delivering a document to the County Clerk is now defined as “lodging for record” as opposed to “indexing,” when the clerk files/ records the documents.

•Liens on Fee Interest. The fee interest (held by the landlord) is now only subject to a lien claim in a limited number of circumstances.

•The Lien Fund. The statute provides more detailed guidance on calculating the lien fund in order to ensure than an owner will never pay more than once for the same work.

•Liens Against Common Elements. The only remedy for claims against a community association is a court-ordered assessment against the unit owners.

•Suppliers to Suppliers May Now File Liens. A supplier to a supplier who falls within the first three tiers of the contracting chain and has a written contract may now file a lien.

•Enforcement by Summary Action. New procedures and parameters for enforcing a lien in Superior Court are spelled out in the amendments to the CLL.

•Residential Construction Liens and the Allocation of Partial Payments. A lien claimant who receives a partial payment must release a share of interest in the property proportionate to each subdivision or tract.

•Discharge of Liens by Owner. Where the lien claim has been paid in full, the claimant has failed to discharge the lien, and 13 months have passed since the date of the lien claim, the owner may now unilaterally have the lien discharged. The owner must file a discharge certification and affidavit setting forth the circumstances of payment to summarily discharge the lien without court intervention.
The New Jersey chapter of LienLaw Online will be updated shortly to reflect these new amendments.

Dennis A. Estis, Esquire Contributing Author
Steven Nudelman, Esquire Contributing Author
Greenbaum, Rowe, Smith & Davis LLP

Lien Law Online eLert for 1/2/2011 - California

2011-01-20T08:38:00.000-08:00

January 2, 2011

Important changes in California’s lien law went into effect January 1, 2011. One of the changes requires lien claimants to serve any mechanic's lien they record with the project owner along with a Notice of Mechanic's Lien to perfect their lien rights. The specific wording which must be used for the Notice of Mechanic's Lien and the revised Claim of Lien form has been updated on the website.

Also, a lien claimant will need to record a Notice of Lis Pendens with the County Recorder's Office when filing a Lien Foreclosure action after January 1, 2011. Specifically, the Notice of Lis Pendens will need to be recorded within 20 days after filing the Lien Foreclosure action.

Deborah S. Ballati, Esquire Contributing Author
B. Scott Douglass, Esquire Contributing Author
Farella Braun & Martel, LLP

Lien Law Online eLert for 11/30/2010 - Alaska

2010-12-01T07:39:00.000-08:00

November 30, 2010

We notified you back in early September that the Alaska Legislature passed House Bill 253 which extends the time within which to file a lien in Alaska from 90 to 120 days. This is a reminder of the change and notification that the chapter and related forms have been revised to reflect the change.

Robert J. Dickson, Esquire (Contributing Author)
Atkinson, Conway & Gagnon, Inc.

Lien Law Online eLert for 10/26/2010 - Colorado

2010-11-17T08:37:00.001-08:00

October 26, 2010

This is a reminder of the changes that are in effect in Colorado's lien statutes regarding breaches of the “Trust Fund” statutes and modifications to the law regarding Lien Waivers.

Please refer to the revised Colorado chapter for text of the changes.

Gilbert R. Egle, Esquire (Contributing Author)

Preeo Silverman Green & Egle, P.C.

Lien Law Online eLert for 9/30/2010 - Arkansas

2010-10-14T12:13:00.001-07:00

September 30, 2010

A revised RESIDENTIAL PRE-CONSTRUCTION NOTICE TO OWNER form for use in Arkansas has been up-loaded to the website. This revised form should be used effective immediately.

Allen C. Dobson (Contributing Author)

Cross, Gunter, Witherspoon & Galchus, P.C.

Lien Law Online eLert for 9/7/2010 - Alaska

2010-09-10T07:37:00.001-07:00

September 7, 2010

Recently, the Alaska Legislature passed House Bill 253 which extends the time within which to file a lien to 120 days. Under prior law, contractors, material suppliers, and service people who have not been paid by property owner for labor or goods, had 90 days from the date of completion of the work, or from the date the service ceases, to file a lien on the property to secure payment of that debt.

This extra time will give contractors, material suppliers, and service people an additional 30 days to work with property owners to secure payment or to negotiate a reasonable payment plan between a creditor and debtor.

This change is effective today, September 9, 2010. Revisions will be uploaded to the Alaska chapter in a few days to reflect the change.

Robert J. Dickson, Esquire (Contributing Author)

Atkinson, Conway & Gagnon, Inc.

Lien Law Online eLert for 9/2/2010 - Mississippi

2010-09-07T08:36:00.000-07:00

September 1, 2010

Mississippi recently enacted changes to its lien and stop notice statutes, effective July 1, 2010, to provide lien protection to rental and lease equipment suppliers. Changes have been made to the Mississippi chapter.

David W. Mockbee (Contributing Author)

Mockbee Hall Drake & Hodge, P.A

Click here to visit LienlawOnline.com now!

Lien Law Online eLert for 8/23/2010 - Missouri

2010-08-23T09:55:00.000-07:00

August 23, 2010

New provisions to the Missouri mechanic’s lien law (§429.016, R.S.Mo) take effect on August 28, 2010 regarding the construction of new residential property. It applies to any residential property transferred on or after November 1, 2010. The new law generally applies only to new construction and not remodeling or repairs to residential property. It does include residential condominiums, townhouses or cooperatives regardless of the number of units. The new law allows owners to file a notice with the recorder of deeds of intended sale, and date of sale, of the property at least 45 days prior to the proposed transfer. In that event, the lien claimant must file with the recorder of deeds a “Notice of Rights” at least 5 days prior to the proposed transfer, giving the owner notice identifying, at a minimum, the claimant, claimant’s address and telephone number, the legal description of the property claimed against, and the person with whom the claimant contracted, including address and telephone number. If such notice is properly given, the claimant need not file the 10-day advance notice of intent to file a lien. A claimant’s failure to comply with this notice provision is deemed the claimant’s waiver of all mechanics’s lien rights.

The new law also:

• Imposes specific information that must be included in the claimant’s mechanic’s lien statement;

• Allows the owner to provide substitute collateral in lieu of a lien against the property;

• Limits the effect of partial lien waivers to the amount claimed due at the time the claimant signs the waiver;

• Imposes penalties for failure to execute final lien waivers upon payment in full.

These revisions require changes to three (3) forms contained in the Missouri chapter. Revisions to the chapter and forms will be available online by the effective date. August 28, 2010.

Darcy V. Hennessy, Esquire (Contributing Author)
Hennessy and Boe, P.A.

Lien Law Online eLert for 7/1/2010 - Washington

2010-07-01T07:43:00.000-07:00

July 1, 2010

In a recent case, Williams v. Athletic Field, Inc., 228 P.3d 1297, ---Wn. App.--- (2010), the Washington Court of Appeals ruled that in order for the Claim of Lien to be valid, it must contain a proper acknowledgment as required under Washington’s Real Property & Conveyance Act (RCW 64.08), which requires certain language to be used and acknowledged by a notary. The language to be used depends on whether the lien claimant is a corporation or individual. The problem at issue in the recent case arises when a claimant is a corporation and relies on the form of lien provided in the lien statute itself (and the lien form relied upon by most claimants). That form does not contain a proper acknowledgment for corporate claimants. Thus, if you are a corporation and use the statutorily proscribed lien form, you risk having the lien declared invalid and unenforceable. It also appears that the form would not be proper for individual claimants because the acknowledgment does not meet the requirements of individual acknowledgments in 64.08 either.

The Washington contributing author has provided a Claim of Lien form which contains 2 options for acknowledgment – one for a corporation and one for an individual. Athletic Field, which was the losing lien claimant, has filed a petition for review in the Washington Supreme Court and one of the issues presented is whether good faith reliance on the lien statute’s form should “save” the lien from being declared invalid. Unfortunately, it could be some time before that issue is decided, so in the meantime, claimants should use the revised Claim of Lien form that is now included in the Washington chapter.

Further, if you have recently recorded a lien using the deemed invalid form, you may be able to amend the claim and use the new form as long as less than 90 days from your last day of work has passed.

Jason R. Wandler, Esquire (Contributing Author)

Oles, Morrison, Rinker & Baker

Lien Law Online eLert for 6/21/2010 - Virginia

2010-06-21T11:42:00.000-07:00

June 21, 2010

Effective July 1, 2010, the requirements that apply to mechanics’ liens on one and two family residential dwelling units will change in Virginia. One and two family residences are the only types of projects for which Virginia requires notification by the lien claimant prior to or shortly after the commencement of work in order to have a valid mechanics’ lien. In order to have a valid lien, a person seeking to claim a lien on such property must notify the mechanics’ lien agent at the commencement of work that he seeks payment for labor performed or materials furnished. The notice must be in writing and delivered by registered or certified mail, or physical delivery, within 30 days of the first date the claimant performs labor or furnishes material. If the claimant fails to give notice within the appropriate 30 day period, his lien is only valid as to work performed or materials furnished on or after the date that notice is ultimately given to the mechanics’ lien agent.

Under the current law, this pre-work notification only has to be given if at the time of issuance the building permit contains the name, mailing address and telephone number of the person designated as the mechanics’ lien agent. Effective July 1, 2010, the owner or lender has more flexibility in the naming the mechanics’ lien agent. The mechanics’ lien agent’s consent to act as mechanics’ lien agent no longer has to be in writing. The name, mailing address and telephone number of the mechanics’ lien agent is no longer required to be on the building permit at the time it is issued. The party obtaining the building permit is allowed to amend the permit to name a mechanics’ lien agent or to change the mechanics’ lien agent at any time.

The lien claimant’s notice must be now given to the mechanics’ lien agent “then named on the permit or amended permit”. (Senate Bill 105).

John S. Morris, III, Esquire (Contributing Author)
Beale, Davidson, Etherington & Morris, P.C.

Lien Law Online eLert for 6/10/2010 - North Carolina

2010-06-10T11:14:00.000-07:00

June 7, 2010

North Carolina Business Court Rules: Ordinary Progress Payment Lien Waiver Operates to Waive and Subordinate Lien Priority.

The North Carolina Superior Court, sitting as a specially designated Complex Business Court, recently ruled that an ordinary mechanic’s lien waiver, submitted in connection with an application for progress payment, operated not only to waive the dollar amount for which the contractor could enforce a lien, but waived also the Contractor’s “first date of furnishing,” thereby resulting in a loss of statutory priority.

In North Carolina, mechanic’s liens are granted a superior priority:

“A claim of lien on real property granted by this Article shall relate to and take effect from the time of the first furnishing of labor or materials at the site of the improvement by the person claiming the claim of lien on real property.” [NCGS §44A-10]

Also, in North Carolina, the grounds and consideration required for a general waiver of lien rights are narrowly proscribed:

“An agreement to waive the right to file a claim of lien on real property. . . which agreement is in anticipation of and in consideration for the awarding of any contract, either express or implied, for the making of an improvement upon real property under this Article is against public policy and is unenforceable. This section does not prohibit subordination or release of a lien granted under. . . this Article.” [NCGS §44A-12(f)]

Accordingly, the typical interpretation in North Carolina is that a contractor has lien rights that date from its “first furnishing;” those lien rights may not be waived generally absent the payment of special consideration, and ordinary progress payment lien waivers operate only to reduce the dollar amount of an otherwise intact lien right for all unpaid sums.

In Wachovia Bank v. Superior Construction Corporation, North Carolina Superior Court, Mecklenburg County, 07 CVS 21256, the Court recently addressed the classic priority conflict between a construction lender’s deed of trust and a general contractor’s lien rights. The general contractor first furnished work on April 22, 2005. The construction lender’s deed of trust was recorded May 19, 2005. Accordingly, under NCGS §44A-10, the general contractor’s lien rights take priority over the lender’s security interest.

However, the contractor had made several initial applications for progress payments, for which it had been paid. In connection with those applications, the contractor had submitted an interim lien waiver, stating that the contractor does hereby:

“waive, relinquish, surrender and release any and all lien, claim, or right to lien on the above described project and premises, arising under and by virtue of the mechanic’s lien laws of the State of North Carolina on account of any labor performed or the furnishing of any material to the above described project and premises up to and including the 31st day of May, 2005.”

In a separate affidavit, the contractor purported to waive any claim of lien against the property “with regard to the amount of funds actually paid.”

Relying upon case law construing situations where a contractor’s waiver or subordination of lien rights was expressly bargained for in consideration of obtaining project financing1, the Court in Wachovia found that the lender’s ordinary funding of progress payments constituted the necessary contractual consideration for a general waiver of rights through May 31, 2005. As a result, the contractor‘s lien rights were not merely limited to unpaid sums. The contractor was deemed to have waived all lien rights for the period beginning with the date of first furnishing through May 31, 2005. Accordingly, all of the contractor’s remaining lien rights, including rights to retainage withheld for the period prior to May 31, 2005, were now inferior to the lender’s deed of trust. The court rejected the contractor’s arguments that the waiver was intended to waive only the dollar amount of the contractor’s rights, but to retain all other rights, including its statutory priority. The court rejected the contractor’s suggestion that the result desired by the lender required the execution of a formal subordination agreement.

The case is on appeal.

[1] See, e.g., Mace v. Bryant Construction Corp., 48 N.C.App. 297, 303 (1980).

Steven D. Hedges, Esquire (North Carolina Contributing Author)

Sparrow Wolf & Dennis, P.A.

Lien Law Online eLert for 6/7/2010 - Oregon

2010-06-07T07:42:00.000-07:00

June 4, 2010

Oregon recently amended ORS Chapters 87 and 701 to protect residential purchasers from lien claimants and to penalize unlicensed subcontractors. See HB 3689 (2010). Specifically, the amendments bar: (1) a purchaser of residential property from waiving his/her protection from claims of lien, and (2) an unlicensed subcontractor from perfecting a claim of lien against owner-occupied residential property.

Importantly, these provisions take effect on January 1, 2011.

Thomas A. Larkin, Esquire (Contributing Author)

Stewart Sokol & Gray LLC

Lien Law Online eLert for 5/26/2010 - Utah

2010-06-07T07:41:00.000-07:00

May 26, 2010

In recently enacted S.B. 107, which went into effect in May, the Utah Legislature included language in the lien statute addressing the time for Enforcement under Section 38-1-11 in the event of bankruptcy. The change allows that if an owner files for protection under the bankruptcy laws of the United States before the expiration of the 180-day period to file an action to enforce a lien, the action may be filed within 90-days after the automatic stay under the bankruptcy proceeding is lifted or expires.

Brian J. Babcock, Esquire (Contributing Author)

Oklahoma Court Provides Clarification

2010-03-31T10:02:00.000-07:00

March 31, 2010

The Oklahoma Court of Civil Appeals recently construed and provided clarity to the timing requirements under Oklahoma’s Pre-Lien Notice statute, which applies to certain lien claimants other than the original contractor. The current section states:

“Prior to the filing of a lien statement pursuant to Section 143.1 of Title 42 of the Oklahoma Statutes, but no later than seventy-five (75) days after the date of supply of material, services, labor, or equipment in which the claimant is entitled or may be entitled to lien rights, the claimant shall send to the last-known address of the original contractor and owner of the property a pre-lien notice pursuant to the provisions of this section.” Okla. Stat. tit. 42, § 142.6(B)(1).

In the case of Izza Robert Jones Jr., d/b/a Professional Plumbing Serv. v. Purcell Invest., LLC, 2010 OK CIV APP 15, --- P.3d ----, 2009 WL 5862436 (Okla. Ct. Civ. App. 2009), the Oklahoma Court of Civil Appeals agreed with the plaintiff/lien claimant that the statute’s timing requirements were ambiguous as a matter of law. Id. at ¶ 5. The court stated that “[w]hether the 75 days begins after services or materials are first supplied, after they are last supplied, or sometime in between, is not clear.” Id. In analyzing the purpose of Oklahoma’s statutorily created lien rights in concert with the notice provisions designed to protect the rights of property owners, the court concluded that to be timely, a pre-lien notice must be provided to the original contractor and owner of the property “no later than 75 days after labor, services, material or equipment have last been supplied by the lien claimant.” Id. At ¶ 19 (emphasis added).

The chapter is being updated to reflect the clarity provided by this decision.

A. Scott McDaniel, Esquire (Contributing Author)

McDaniel, Longwell, Acord & Kroll, PLLC

Lien Law Online eLert for 3/9/2010 - Wyoming

2010-03-09T07:25:00.001-08:00

March 9, 2010

A recent decision in the Wyoming Supreme Court has resulted in a change in language that must be used on the form of Lien Statement.

In the case of Winter and Jo/Etta, LLC v. Andy Pleasant dba A. Pleasant Construction, (Wyoming Supreme Court) S-09-0058, S-09-0059, 2010 WY 4; 2010 Wyo. Lexis 4 (decided 1/12/2010), the Court held an amended lien statement filed pursuant to W.S. 29-1-301(a), which provides in pertinent part that, "In order to have a perfected lien pursuant to this title, a lien claimant shall file with the county clerk a lien statement sworn to before a notarial officer" was, as a matter of law, invalid if the lien affiant does not swear to the "truth and accuracy of the lien statement". It was not enough for the construction company's attorney to assert he was "duly sworn"...and was signing with authority and on the behalf of the client. Without any change in the statutory language, the Court held that the plain language of the statute requires an affiant to swear to the "truth and accuracy of the lien statement" in order for it to be valid.

The Wyoming chapter has been updated with the foregoing information and the Lien Statement form has been updated to reflect the court’s decision.

Raymond (Ray) W. Martin, Esquire (Contributing Author)

Sundahl, Powers, Kapp & Martin, LLC

Click here to visit LienlawOnline.com now!

Lien Law Online eLert for 3/8/2010 - Georgia

2010-03-08T12:51:00.001-08:00

March 8, 2010

Recent decisions of the Georgia Court of Appeals have confirmed the requirement that a valid Notice of Commencement of the construction project must set out the true owner of the property on which the improvements are being made, and that it also must include a legal description of the property being improved. The failure to correctly list the property owner and include a legal description of the property will make the Notice of Commencement invalid, thus relieving a potential remote lien claimant of the requirement to provide a Notice to Contractor to the Owner and Contractor in order to preserve lien rights. In addition, another Georgia Court of Appeals case held that the failure to file the Notice of Commencement within 15 days of physically starting work at the project site will not render the Notice of Commencement invalid, and will not relieve a remote lien claimant from its obligation to serve a Notice to Contractor, if the Notice of Commencement is filed by the time a potential lien claimant must have provided its Notice to Contractor. In other words, a late-filed Notice of Commencement, or a defective Notice of Commencement which is later correctly filed, still may be valid and enforceable as to remote lien claimants who have not supplied labor, material or equipment to the project site at the time of the filing of the proper Notice of Commencement. Although this Georgia Court of Appeals case did not specifically address the consequences of a re-filing of a Notice of Commencement to replace a previously-filed but defective Notice of Commencement, the rationale of the Court would suggest that such a re-filed Notice of Commencement will still be valid as to later-performing sub-subcontractors and suppliers to subcontractors.

For more information, contact Frank Riggs, Contributing Author of the Georgia Chapter at frank.riggs@troutmansanders.com

Frank E. Riggs, Jr., Esquire (Contributing Author)

Troutman Sanders, LLP

Lien Law Online eLert for 3/5/2010 - Oregon

2010-03-05T09:12:00.000-08:00

March 5, 2010

The Oregon chapter of Lien Law Online has been updated and revised to account for recent changes in Oregon law. We would like to welcome our new Contributing Author for Oregon, Thomas A. Larkin, Esq who is with the firm of Stewart Sokol & Gray, LLC in Portland.

Below is a summary of Oregon's 2010 lien law updates:

Information Notice to Owner

Oregon now requires the original contractor on a residential project to furnish an “Information Notice to Owner About Construction Liens” for contracts exceeding $2,000. ORS 87.093(4). Where the contract value is initially below $2,000, but subsequently increases during the course of performance, the contractor must deliver this notice not later than five days after he / she knows or reasonably should know that the contract will exceed $2,000. Id. These provisions change the previous $1,000 minimum contract value requirement for residential improvements. Other statutory Information Notice to Owner requirements remain the same.

The Oregon Legislature redacted a provision requiring delivery of an “Information Notice to Owner About Construction Liens” not later than five days after making an oral contract for a residential improvement.

Definition of Residential Construction and Residential Property

Oregon redefined “Residential construction or improvement” to mean “the original construction of residential property and the repair, replacement, remodeling, alteration or improvement of residential property.” ORS 87.093(8)(a).

“Residential property” now includes a residential dwelling’s driveway, swimming pool, terrace, patio, fence, porch, garage, basement and other adjacent or appurtenant structure to the residential dwelling. ORS 87.093(8)( c). Importantly, this list is not a limitation on what constitutes “residential property.”

Foreclosure

The county or its officer or employee cannot be named a party to a foreclosure suit. ORS 87.083(2).

For the county to release a lien or return the money for a cash deposit to remove the lien, Oregon now requires a person to notify the lien claimant and treasurer that no one commenced a foreclosure suit within the statutory time constraints. ORS 87.088(1). Further, the notice must state that the lien claimant has fifteen (15) calendar days to object to the lien release or return of the money. Id. The notice must inform the claimant that an objection requires documentation evidencing a timely commencement of foreclosure proceedings or that the time to initiate a suit did not expire. Id. In the event of an objection, the treasurer reserves the right to decide how to distribute the money or to commence an interpleader action. Id.

The upated and revised chapter is now online. To review the bio on the new Contributing Author, Thomas A. Larkin, click here.

Contributing Author contact info:

Thomas A. Larkin, Esquire (e-mail)

Stewart Sokol & Gray LLC (website)

Lien Law Online eLert for 1/13/2010 - Illinois

2010-01-13T10:33:00.000-08:00

January 13, 2010

The following change in the Illinois Mechanics Lien Act is in effect for Contracts entered into after January 1, 2010:

Section 7 of the Illinois Mechanics Lien Act has been amended to require original contractors for improvements to an owner-occupied single-family residence to give the owner written notice within 10 days after recording a mechanics lien. The amendment applies only to contracts entered into after January 1, 2010. This notice requirement is the only substantive change to Section 7. Other than adding subsection (d), which contains the new notice requirement, and breaking out Section 7's previously-existing statutory language into subsections (a), (b) and (c), Section 7 remains the same.

Kenneth M. Roberts, Esquire (Contributing Author)

Kevin L. Kolton, Esquire (Contributing Author)

Schiff Hardin LLP

Lien Law Online eLert for 12/29/2009 - Michigan

2009-12-30T07:24:00.000-08:00

December 29, 2009

Michigan Homeowner Construction Lien Recovery Fund Runs out of Money

In a sign of the times, the Michigan Homeowner Construction Lien Recovery Fund is broke, and there is currently no way to replenish its coffers.

The Michigan Homeowner Construction Lien Recovery Fund (Fund) was created under Part 2 of the Michigan Construction Lien Act (MCL 570.1101, et seq) to provide protection when the homeowner, has in good faith, paid their licensed contractor for materials and labor and the contractor failed to compensate materialmen, subcontractors, and/or laborers.

The funding problem for the Fund stems from PA 497 of 2006, an amendment to the Michigan Construction Lien Act, which repealed Section 201(2) of the Act effective January 3, 2007. This amendment, reportedly the product of a legislative compromise, eliminated the ability of the Fund to make a $50 special assessment when the Fund fell below $1 million. Instead, the Fund can only assess members a $10 annual renewal fee.

Beginning in 2006 and continuing through July, 2009, the Fund experienced an unprecedented increase in claims. This increase closely mirrored the collapse of the housing market. The Fund is currently involved in over 250 pending lawsuits involving more than 350 claims against it that total more than $18 million. In 2009, Judgments against the Fund have averaged $123,800 per month. By mid-October, there was only $524,000 remaining in Fund coffers.

On October 21, 2009, the Fund sought to consolidate all 250 of the pending lawsuits into one proceeding in Macomb County and proposed a pro rata distribution of the remaining money among all the lien claimants. The result would be pennies on the dollar. The Fund’s (interpleader) motion was heard by Judge James Biernat, Sr. on November 2, 2009, but denied several weeks later in a written opinion.

As things stand now, and absent legislative intervention, the Fund will run dry within a few months. This will leave unpaid subcontractors and suppliers to fight things out with Homeowners, who will find themselves stuck in the middle of dispute with their builder and at significant risk of paying twice for improvements to their home.

For more information, contact Peter Cavanaugh Contributing Author or visit his website -- www.MichiganConstructionLaw.com

Visit LienlawOnline.com now!

Lien Law Online eLert for 12/8/2009 - New Jersey

2009-12-10T07:42:00.000-08:00

December 8, 2009

On December 3, 2009, New Jersey Assemblyman Patrick J. Diegnan, Jr. introduced a bill that dramatically revises the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1 et seq. in accordance with a March 2009 proposal by the New Jersey Law Revision Commission. Assemb. 4319, 213th Leg. (N.J. 2009).

Specifically, according to the bill’s Statement, the proposed legislation revises the Construction Lien Law, which was enacted in 1993, by:

• clarifying and adding certain defined terms, especially pertaining to the meaning of “residential,” to conform to actual construction industry usage;

• clarifying (and in some cases rearranging) procedures for the filing and amending of the lien claim and for the calculation, distribution and enforcement of the lien fund;

• amplifying provisions for discharging a satisfied lien claim;

• adopting court holdings regarding the concepts of contract price, lien fund and lien claim;

• further defining the arbitrator’s role in residential construction contract lien arbitrations;

• modifying and adding time limits for filing and perfecting residential construction contract lien claims;

• specifying the application of lien claims to community association property; and

• addressing certain ambiguities as to mortgage priorities with respect to lien claims.

The bill also revises some statutory language simply to make it easier for participants in the construction industry to use the law. The bill enhances application of the current statute and clarifies the procedures to be followed in order to process and perfect a construction lien claim.

While the bill may not move prior to the end of this legislative session, it is likely that it will be reintroduced in the next session and move as early as mid-January 2010. We will follow the progress of the proposed legislation and provide updates as new information becomes available.

Dennis A. Estis, Esquire Contributing Author

Steven Nudelman, Esquire Contributing Author

Greenbaum, Rowe, Smith & Davis LLP

Lien Law Online eLert for 11/19/2009 - Maine

2009-11-19T08:52:00.001-08:00

November 19, 2009

The contributing author on the Maine chapter of Lienlaw Online has made some minor changes and added additional, timely, information regarding Bond Claims on State Owned Projects. For convenience, the added information regarding Bond Claims is reprinted below:

Bond Claims on State Owned Projects

Projects involving “the construction, alteration or repair of any public building or other public improvement or public work, including highways” are covered by the Maine Public Works Surety Bond Law.[23] This law applies to any contracts exceeding $125,000 for the construction, alteration or repair of a public building. Maine’s mechanic’s lien law does not cover projects on state owned property; the unpaid subcontractor or supplier’s recourse is on a payment bond issued on the project.

The Surety Bond statute requires that the bond provided on a public project contain certain minimum requirements. Specifically, the bond has to protect those who have a direct contract with the general contractor and also those who have a direct contract with a subcontractor of the general contractor.[24] In other words, the payment bond provides coverage for two tiers: subcontractors and sub-subcontractors.

At the discretion of the state, Maine also allows an irrevocable reasonable letter of credit to be posted in lieu of a payment bond. The statute contains specific requirements for the financial institution issuing the letter of credit, including the fact that the institution must be federally insured and have a bond rating of A3 by Moody’s or A− by Standard and Poor.[25]

A supplier (or subcontractor) to a subcontractor of the general contractor has specific notification requirements which must be followed. Those without a direct contract with the general contractor must provide written notice to the general contractor within 90 days of the date on which the last labor or material was furnished and suits on all bond claims must be filed within one year.[26] The notice must state the amount claimed and the name of the party to whom the material was furnished or labor supplied. This notice needs to be sent by registered or certified mail, postage pre-paid, with an envelope addressed to the contractor any place the contractor maintains a residence or conducts business. Failure to comply with the requirement of notice by registered or certified mail may not invalidate a bond claim as long as the general contractor has received actual written notice of the claim. [27]

All changes have been uploaded on the website for immediate review.

John A. Hobson, Esquire (Contributing Author)

Perkins Thompson, P.A.

Lien Law Online eLert for 11/13/2009 - California

2009-11-16T07:11:00.000-08:00

November 13, 2009

Upcoming Changes in California Lien Law

Several subscribers have sent inquiries regarding changes in California's lien law which were recently passed by the CA legislature. In fact, changes are forthcoming, but they will not take effect until January 1, 2011.

There will be two changes in the lien law statutes in California. Under the first change, after January 2011, lien claimants will need to serve any mechanic's lien they record on the project owner along with a Notice of Mechanic's Lien to perfect their lien rights. The specific terms to be used in the Notice of Mechanic's Lien will be set forth in a revised Section 3084 of the California Civil Code. The specific wording, which must be used for the Notice of Mechanic's Lien, will be updated on the website prior to the effective date.

Under the second change, a lien claimant will need to record a Notice of Lis Pendens with the County Recorder's Office when filing a Lien Forclosure action after January 1, 2011. Specifically, the Notice of Lis Pendens will need to be recorded within 20 days after filing the Lien Foreclosure action. This change will be accomplished through a revised Section 3084 of the California Civil Code 3146.

The foregoing changes will be incorporated into the California chapter when we get closer to the changes going into effect.

Deborah S. Ballati, Esquire, Contributing Author
B. Scott Douglass, Esquire, Contributing Author
Farella Braun & Martel, LLP

Lien Law Online eLert for 10/28/09 - New Jersey

2009-10-29T12:17:00.000-07:00

October 28, 2009

The Contributing Author for New Jersey has updated the chapter and added references to notable 2009 case decisions. One case in particular, Schadrack v. K.P. Burke Builder, LLC, contains important decisions regarding the construction lien arbitration process.
Updates regarding the changes are now online.

Contributing Authors:
Dennis A. Estis, Esquire
Steven Nudelman, Esquire
Greenbaum, Rowe, Smith & Davis LLP

Lien Law Online eLert for 9/17/2009 - Pennsylvania

2009-09-17T07:35:00.000-07:00

September 16, 2009

The Pennsylvania legislature has passed Act 34 (Senate Bill 563) which was recently signed into law by Governor Rendell. The amendments to Pennsylvania’s lien statute will go into effect on October 10, 2009.

The changes are significant in that they, once again, allow up-front waivers of lien rights from contractors and subcontractors on “residential properties” even before any work is done or as a condition of the contract. It was in 2007 that the legislature had decided that such advance waivers were unenforceable and against public policy-but allowed certain, limited exceptions for residential projects.

With the 2009 changes, the legislature has “taken a step back” and will allow advance lien waivers on “residential property” which is defined as “property on which there is or will be constructed a residential building not more than three stories in height, not including any basement level regardless of whether any portion of that basement is at grade level, or which is zoned or otherwise approved for residential development on which there is or will be constructed a residential building not more than three stories in height, not including any basement level, regardless of whether any portion of the basement is at grade level, planned residential development or agricultural use, or for which a residential subdivision or land development plan has or planned residential development plan has received preliminary, tentative or final approval on which there is or will be constructed a residential building not more than three stories in height, not including any basement level, regardless of whether any portion of that basement is at grade level, pursuant to the act of July 31, 1969 (P.L. 805, No. 247), known as the “Pennsylvania Municipalities Planning Code.”

The 2009 changes also removed the $1,000,000 limitation on the residential exception. Certainly, these changes could place contractors, subcontractors, sub-subcontractors and material suppliers at greater risk of nonpayment for services rendered on residential property projects by eliminating lien rights.

The changes go into effect on October 10, 2009. The Pennsylvania chapter will be updated prior to the effective date.

Carl G. Roberts, Esquire Contributing Author
Ballard Spahr LLP

Lien Law Online eLert for 8/26/2009 - North Carolina

2009-08-27T06:39:00.000-07:00

August 25, 2009

A North Carolina Bankruptcy Court recently ruled that a subcontractor’s service of a notice of claim of lien on funds after the date the contractor had filed a petition in bankruptcy violates the automatic stay. Thus, held the court, the lien on funds was void. Further, because under North Carolina law a subcontractor may file a lien on real property only upon the service of a valid notice of claim of lien on funds, the subcontractor’s lien on real property was ruled void as well. This trial court opinion has been appealed.

In re: Harrelson Utilities, Inc., Case No. 09-02815-8-ATS, United States Bankruptcy Court, Eastern District of North Carolina, Raleigh Division July 30, 2009), recognized that whether a post-petition claim of lien in North Carolina falls within the exceptions to the automatic stay found in Bankruptcy Code § 362(b)(3) depends on a question of state law. In particular, if under state law the subcontractor has an interest in the funds prior to perfection (i.e. prior to service of notice of lien), the exception applies and the lien is valid. However, if under state law the lien right is created by the giving of the notice, the exception does not apply and the lien is void.

In reaching its decision, the court distinguished between North Carolina liens on real property and liens on funds, ruling that the statutory provision that a lien on real property “relates back” to the time of first furnishing of labor or materials, creates an interest in the realty prior to perfection, whereas a lien on funds, the court found, was afforded no such benefit. No subcontractor interest in the fund is created until service and receipt of notice. Curiously, the court did not find NCGS § 44A-22 provides the priority necessary to enforce a post-petition lien on funds. Section 44A-22 provides that a lien on funds enjoys priority over all other interests or claims “theretofore of thereafter created.”

While a boon to owners seeking to avoid all liens, this distinction between real property and fund liens provides no solace for North Carolina subcontractors. Under state law subcontractors may exercise only a subrogated right of the contractor to lien real property and, further, must serve a valid lien on funds as a precondition to perfecting that subrogated right. Here, where a contractor’s bankruptcy cuts off an opportunity to perfect a lien on funds, the subcontractor is additionally precluded from perfecting a lien on real property.

The In re: Harrelson ruling has generated spirited debate in the North Carolina construction industry and construction law bar. Industry advocates warn that the ruling, if sustained on appeal, will require subcontractors to serve liens on funds as soon as they first supply labor or materials, with predictable negative results on project cash flow. Others observe that some subcontractors may receive word that the contractor is experiencing financial trouble and, thus informed, proceed to serve liens on funds to the detriment of subcontractors who do not have that information or who do not receive it until alerted to a contractor bankruptcy. This result, observers argue, is inconsistent with the effect and intent of North Carolina lien law to require all subcontractors to share pro rata where a fund is inadequate to satisfy all claims. Further, some observers say liens on funds should not be afforded less dignity because actual receipt of a formal notice of lien on funds is far better notice than the first provision of labor or materials. Often an owner has no practical means of knowing who is supplying the subcontracted labor or materials to the contractor. Some express concern that this ruling could be logically extended to void liens on real property as well.

Steven D. Hedges, Esquire Contributing Author
Nexsen Pruet, PLLC

Lien Law Online eLert for 8/20/09 - North Dakota

2009-08-27T06:34:00.000-07:00

August 20, 2009

For the first time in years, the North Dakota legislature has made a number of substantive changes to the mechanic's lien statutes. Effective August 1, 2009, the following changes took place in North Dakota:

1. Very significantly, the legislature added a new section providing that an owner that successfully contests the validity or accuracy of a construction lien by an action in district court must be awarded the full amount of all costs and reasonable fees incurred by the owner. This puts a huge burden on anyone claiming a mechanics lien.

2. The name of a mechanic's lien was changed to "construction" lien.

3. The legislature repealed N.D.C.C. Sec. 35-27-05 dealing with the filing of a notice of intent to claim a mechanic's lien, and the requirements thereof; instead the legislature added a sentence to N.D.C.C. Sec. 35-27-02 requiring that written notice that a lien will be claimed must be given to the owner of the real estate by certified mail at least ten days before the recording of the "construction" lien.

4. The legislature changed the provisions of N.D.C.C. Sec. 35-27-04 which dealt with mortgages given in good faith for the purpose of providing funds for payment of materials or labor for the improvement. Previously, a lien could be obtained, prior to such mortgages, by recording a notice of intent to file a mechanics lien prior to the recording of the mortgage. This generally did not happen because few people filed a notice of intent at the beginning of the project, and before the financing was in place; however, it was an option. The change is that the only way to obtain such priority now is to file the actual "construction" lien. Since the lien cannot be filed until an amount is due, from a practical standpoint, it is unlikely that a claimant could file a construction lien ahead of these mortgages.

5. The legislature repealed N.D.C.C. Sections 35-27-11 and 34-27-12. These set out the procedural requirements for the lien and the requirements for the recorder as far as indexing. However, N.D.C.C. 35-27-13, which provided that the lien is to be perfected by recording within 90 days was amended by stating the lien must include the dates of the first and last contribution, and the person with which the claimant contracted. (This statute already included that the lien had to describe the property and state the amount due, and that the person had to comply with all the provisions of the chapter. The practical effect is that the person claiming the lien must still keep an itemized separate account, separate and apart from all other accounts in order to comply with N.D.C.C. 35-27-10. The construction lien must include (a) the legal description of the property,(b) the amount due, (c)the dates of first and last contribution, (d) the name of the person with whom the claimant contracted. I recommend it also include (e) the name of the person in possession of the land with a statement that written notice that a lien would be claimed was given to the owner by certified mail at least ten days before recording of the lien (this notice would no longer ever be recorded) and (f) the date of the contract. In other words, the earlier form should still be the form to use after modifying "mechanics lien" to "construction lien", and modifying the language regarding the giving of the notice of intent, and adding the dates of the first and last contribution.

6. Previously the failure to file the lien within 90 days did not defeat the lien against purchasers or encumbrancers in good faith, for value, whose rights accrued after 90 days and before the lien was filed. This has now been changed to state that the failure to file does not defeat the lien as against these parties if the rights accrue before the filing of the lien. The effect of this is that if someone buys the property within the 90 day period the lien will be lost if the lien is not filed within the 90 day period. Before, if someone bought on, say, day 30 and a laborer had improved the property, the laborer could still get a lien against the buyer even if the lien was not filed within 90 days.

7. Finally, the legislature removed the class A misdemeanor criminal penalty for the filing of a lien that includes classes of materials not subject to a mechanic's lien.
The North Dakota chapter will be updated soon to reflect these changes.

Lyle W. Kirmis, Esquire Contributing Author
Zuger Kirmis & Smith

Revisions to Iowa Lien Law Under Consideration - 8/12/09

2009-08-13T07:16:00.000-07:00

August 12, 2009

The Iowa legislature is considering the passage of HSB 173/ SSB 1215. It would revise Iowa Code Chapter 572, Mechanic's Lien Law, to require contractors and material providers to give public notice of their rights in order to perfect a mechanic's lien. Notice will be posted on a State Construction Registry.

The bill would also expand the right to recover attorney fees to any prevailing plaintiff and allows any prevailing defendant to recover attorney fees, not just those defending claims involving owner-occupied properties. Commercial construction would be exempt from the central registry requirement.

The bill has been assigned to subcommittee in House and Senate Judiciary Committees and will carry over to the 2010 session.

Lien Law Online eLerts 7/27/09 - Arkansas

2009-07-27T12:18:00.000-07:00

ARKANSAS ADOPTS SIGNIFICANT CHANGES TO
MATERIALMAN’S AND MECHANIC’S LIEN STATUTES

Arkansas recently passed HB 1594, now Act 454, which amends Arkansas’s mechanic’s and materialmen’s lien statutes. The amendments create more certainty that property owners, particularly residential property owners, will actually receive required statutory lien notices, will provide an enforcement mechanism for contractors failing to provide homeowners with the required pre-construction notice, and provide a quick means for frivolous, improperly filed liens to be removed as a cloud on title. More specifically, the Act:

Clarifies that suppliers of drainage tiles, soil pipes, architects, engineers, surveyors, appraisers, landscapers, abstractors, and title insurance agents must follow the same notice requirements before filing a lien as material suppliers, subcontractors, and general contractors.

Provides that service by mail of the required construction notices is “complete when mailed,” and that service of such notices may also be satisfied by written third-party (e.g. UPS, FedEx) verification of delivery at any place where the owner maintains an office, conducts business, or resides.

Bars a residential contractor from bringing an action to enforce any provision of a residential contract if the contractor fails to give the required pre-construction notice to the homeowner.
Provides subcontractors and material suppliers a way to perfect a lien on a residential project if a residential contractor fails to provide the required pre-construction notice to the homeowner.
Clarifies that a subcontractor is required to provide a 75-day notice in order to perfect a lien on a commercial project.

Allows an owner, material supplier, subcontractor, or anyone interested as mortgagee or trustee in the real estate upon which improvement have been made to file suit in circuit court against a contractor or subcontractor who refuses to provide a correct list of all the parties furnishing materials or labor and the amount owed to each, or who falsely certifies that the owner has received the required preliminary construction notices. The prevailing party will receive a judgment for any damages proximately caused by the violation, costs of the action, and reasonable attorney’s fees.

Changes the amount to “bond off a lien” to the amount of the lien claim, as opposed to twice the amount of the lien claim.

Provides a procedure whereby an owner or contractor may petition the court for an expedited hearing to decide whether a lien claimant properly complied with the notice requirements.

The changes will go into effect on August 1, 2009.

Contributing Author: Allen C. Dobson Esq.
Cross, Gunter, Witherspoon & Galchus, P.C.

Lien Law Online eLert 6/24/2009 - Colorado

2009-07-22T08:39:00.000-07:00

Colorado has passed legislation that affects ALL Lien Waivers entered into as of July 1, 2009. The new law modifies two (2) sections of the Colorado Revised Statutes (CRS).

The first is a section in the criminal code entitled Unlawful Activity Concerning the Selling of Land, CRS § 18-5-302. This statute deals with certain fraudulent conduct and representations made in the context of a sale of land or representations concerning the ownership of land. To this statute has now been added a new subsection (3) that imposes criminal sanctions for the failure to timely pay funds received from a construction loan where a lien waiver is signed. The new statutory language states as follows:

(3) a person who signs a lien waiver or a construction loan under section 38-22-119, CRS, and knowingly fails to timely pay any debts resulting from a construction agreement covered by the waiver commits a class 1 misdemeanor, unless there is a bona fide dispute as to the existence or amount of the debt.

The term “bona fide” generally means “real, actual, genuine and not feigned.” (Black’s Law Dictionary) Therefore, one should assume that a real and not a contrived dispute would be necessary to justify any failure to pay funds to lower-tier subcontractors or suppliers.
A class 1 misdemeanor is a crime in Colorado punishable by imprisonment of six to eighteen months, or fines of $500 to $5,000, or both.

The bill also amends the civil statute dealing with waivers in the context of mechanics liens by adding a statutory section to the current statute entitled “Agreement to Waive-Effect.” CRS § 38-22-119. This new statutory section reads as follows:

(2) An agreement to waive lien rights shall contain a statement, by the person waiving lien rights, providing in substance that all debts owed to any third party by the person waiving the lien rights and relating to the goods or services covered by the waiver of lien rights have been paid or will be timely paid.

By use of the words “providing in substance,” the statute does not dictate the exact wording required in a lien waiver, but does clearly state that words to that effect must be contained in lien waiver documents. Thus, after this statute takes effect, construction lien waivers must include language that essentially says that, “all debts owed to any third party by the person waiving the lien rights and relating to the goods or services covered by the waiver of lien rights have been paid or will be timely paid.”

The new statute has been signed by the Governor and takes effect on July 1, 2009. After that date all construction lien waivers must comply with this new statutory requirement. In addition, the failure to properly disburse funds received from a construction loan may lead to criminal action against the offending contractor or subcontractor.

Gilbert R. Egle, Esquire Contributing Author
Preeo Silverman Green & Egle, P.C.

Lien Law Online eLert 5/15/2009 - Utah

2009-07-22T08:37:00.000-07:00

The Utah general assembly recently enacted important changes to the state’s lien statutes. The changes modify (1) the definition of final completion of an original contract and project; (2) the subcontractor preliminary notice requirements; (3) the notice of commencement filing requirements; and (4) the DOPL standardized building permit numbering system. In addition, the changes prohibit a compliance agency from deviating from the DOPL standardized building permit numbering system.

The Utah chapter has been updated to reflect these changes.

Brian J. Babcock, Esquire (Contributing Author)
Babcock, Scott & Babcock, P.C.

Lien Law Online eLert 5/4/2009 - Tennessee

2009-07-22T08:36:00.000-07:00

Important Case Guidance - Tennessee

A decision handed down by the Tennessee Court of Appeals in Williamson County Ready Mix, Inc. v. Pulte Homes Tennessee Limited Partnership, No. M2007-COA-R3-CV, at *5-*7 (Tenn. Ct. App. Dec. 15, 2008); T.C.A. 66-11-112; T.C.A. 66-11-118(b) has clarified what a material supplier must do to perfect a lien on a project where multiple units are involved. The court determined that “where a materialman provides materials used in the construction of multiple townhome units, the lienor is required to apportion its lien and perfect a lien for each townhome unit; a ’blanket lien’ on a townhome building is not effective and does not give priority against subsequent purchasers and encumbrances of separate townhome units.”

Cameron S. Hill, Esq. (Contributing Author)
BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, PC

Lien Law Online eLert 4/2/2009 - New Mexico

2009-07-22T08:33:00.000-07:00

The New Mexico House of Representatives has requested that the New Mexico legislative council assemble a task force to study and examine issues and concerns regarding the ease of placing liens upon homeowners' properties and how that has led to abuse by some contractors and subcontractors and the Stop Notice Act in the process of applying a mechanic's lien on a homeowner's property and the homeowner's ability to defend against a wrongful lien. The House of Representatives has requested that the task force report to the appropriate interim legislative committee by October 2009.

Carl A. Calvert, Esquire
Calvert Menicucci, P.C.

Lien Law Online e-lert 4/1/2009 - Georgia

2009-07-22T08:30:00.000-07:00

Effective March 31st, significant changes in Georgia's Lien Statute went into effect. Statutory forms have been revised. Various lien law deadlines have been altered. Notice, filing and service requirements have been changed.

It is extremely important that you take note of the changes and use the new forms and filing information from this point forward. The Georgia chapter and related forms were updated on the site at midnight March 30th.

GEORGIA CONTRIBUTING AUTHOR:
Frank E. Riggs, Jr., Esquire
Troutman Sanders, LLP