Lien Law Online eLert for 8/2/2013 - Oregon

August 2, 2013

First, the Oregon Court of Appeals recently confirmed that persons who accept a mortgage or trust deed as security for a construction debt may forfeit their right to a lien claim. Claimants must now carefully consider whether and when to accept security in an improvement for performance concerning the construction of the improvement.

Second, the Oregon legislature repealed its “stay of foreclosure” law that allowed property owners to stay a construction lien foreclosure action by filing a complaint with the Construction Contractors Board. The repeal, however, is only temporary and resumes effect in 2017.

Thomas A. Larkin, Esquire (Contributing Author)

Stewart Sokol & Gray LLC (www.lawssg.com)

Lien Law Online eLert for 7/11/2013 - Wyoming

July 11, 2013

The Wyoming Legislature has recently enacted changes to the Wyoming Lien statute.  The most significant changes include an extension to the time period for filing notice of a lien, and an additional section about federal, state and local officials’ or employees’ right to discharge a lien.

Effective July 1, 2013, a lien claimant, in the case of real property, now has thirty (30) days from the date the lien statement is filed to send notice to the last record owner or his agent.  This is a significant time extension for filing notice as the prior statute required the lien claimant to send notice within five (5) days of filing.  In addition, the statute now includes the following language about the validity of liens: “Failure to send the notice required under this subsection shall not affect the validity of the lien.”  WY ST § 29-1-312.  The notice of satisfaction timeline under § 29-1-313(a) has also been extended from five (5) to thirty (30) days.  WY ST § 29-1-313.

Effective March 15, 2013, a federal, state or local official or employee may discharge a lien under both subsections (b) and (d) of Chapter 29-1-601.  Subsection (b) is the general provision that allows any person to discharge a lien against their personal or real property after following the procedural steps within the subsection.  The added subsection (d) applies only to federal, state, or local officials or employees and allows them to discharge a lien by recording an affidavit with the county clerk.  Once the public official or employee provides notice of the affidavit the lien claimant is obligated to respond within twenty (20) days by petitioning the district court in which the lien was filed and stating why the lien was valid.  If the lien claimant does not appear in court or if the lien claimant fails to convince the court that the lien was valid, the courts are authorized to impose penalties and require the lien claimant pay the other party’s reasonable attorney’s fees.  WY ST § 29-1-601.

Additionally, the legislature introduced a bill on January 8, 2013 that proposes changes to several provisions of the Wyoming Lien statute that impose monetary penalties.  If the bill is enacted into law, it would replace the monetary penalties with class D misdemeanors.  The changes would apply to the following sections: 29-1-601, 29-3-108, 29-5-106, 29-7-102(b), and 29-7-207. (2013 Bill Text WY H.B. 39).

The changes enacted in 2010 repealing several sections of the old statute remain in effect.

Jason Robinson (Contributing Author)

Babcock Scott & Babcock

Lien Law Online eLert for 7/9/2013 - Virginia

July 9, 2013 “Effective July 1, 2013, lien claimants which provided labor for the construction of an improvement will not be entitled to a lien unless it held a valid license or certificate from the Virginia Board of Contractors in the proper class of license for the value of the work performed. The way the statute is written, the claimant must have the license when the work is performed. It will not be sufficient to obtain a license after the work is performed but before the lien is filed.” John S. Morris, III, Esquire (Contributing Author) Beale, Davidson, Etherington & Morris, P.C.

Lien Law Online eLert for 7/2/2013 - Iowa

July 2, 2013 This is a reminder of changes in Iowa’s mechanic’s lien law that went into effect in 2013. (1) New Online Filing System. All mechanic’s liens, pre-lien notices (for residential projects), and other lien-related filings (other than district court filings) must be filed or “posted” on a new, centralized online registry, termed the Mechanic’s Notice and Lien Registry (or MNLR). The MNLR is at www.sos.iowa.gov/mnlr, and the help line for the MNLR is: 888-767-8683. (2) The Two Relevant Categories of Residential Construction Companies. For pre-lien notice purposes (see #3 and #4), you must know whether you are a general contractor or a subcontractor for a project. In short, a “general contractor” is anyone who furnishes labor or materials directly to an owner, and a “subcontractor” is anyone who furnishes labor or materials to a general contractor, owner-builder, or anyone other than an owner (such as another subcontractor). (3) Two Notice Requirements for Residential General Contractors. Pursuant to the new law and administrative rules effective January 2, 2013, in order to preserve the right to later file a lien, all general contractors on residential projects must (1) post a "Commencement of Work" Notice to the MNLR within ten (10) days of commencement of work on each project, and (2) also provide an “owner notice” to the owner, via a construction contract or separate notice, at the outset of the project, as was required under the old law. Below is the new owner notice language to be included in the contract. Persons or companies furnishing labor or materials for the improvement of real property may enforce a lien upon the improved property if they are not paid for their contributions, even if the parties have no direct contractual relationship with the owner. The state construction registry provides a listing of all persons or companies furnishing labor or materials who have posted a lien or who may post a lien upon the improved property. The state construction registry, called Mechanic’s Notice and Lien Registry, can be found at www.sos.iowa.gov/mnlr, and the toll-free telephone number for this state construction registry is 888-767-8683. (4) One Notice Requirement for Residential Subcontractors. All residential subcontractors (including suppliers) working under a general contractor or owner-builder are required to post a “Preliminary Notice” to the MNLR if they want to preserve their lien rights. This notice should be posted as soon as possible, which currently means, as soon as labor or materials are furnished to or for a project. (5) Mechanic’s Liens. General contractors and subcontractors must post their mechanic’s liens on the MNLR within 90 days as of the date of last work to ensure their lien is enforceable to the largest extent possible under the law. To be clear, if one fails to timely post a commencement or preliminary notice for a residential project, such person loses the right to post & enforce a mechanic’s lien for the project. Jodie McDougal, Esquire (Contributing Author) Davis Brown Law Firm

Lien Law Online eLert for 5/14/2013 - Georgia

May 14, 2013 Earlier this month, the Georgia legislature enacted, and the Georgia governor signed into law, an amendment to the Georgia lien law which expands the scope of the labor, equipment, materials and services which may be included in a claim of lien in Georgia. Prior case law, and particularly the 2012 decision of the Georgia Court of Appeals in 182 Tenth, LLC v. Manhattan Construction Co., limited the scope of a mechanic’s lien in Georgia to the value of labor and materials which “actually went into and became a part of the property.” The amended Georgia Code Sections 44-14-361(c) and (d) now allow a lien claim to include in a claim of lien “the amount due and owing the lien claimant under the terms of its express or implied contract, subcontract, or purchase order.” As a result of this amendment, lienable amounts now may include contractor and supplier general conditions costs, as well as other support costs, profit and pre-judgment interest established by the contract. When the amendment takes effect on July 1, 2013, it will potentially reverse a clear trend by the Georgia courts to restrictively view the types of costs and damages properly includable in a claim of lien. For more information, contact Frank Riggs, Contributing Author of the Georgia Chapter at frank.riggs@troutmansanders.com Frank E. Riggs, Jr., Esquire Troutman Sanders, LLP

Lien Law Online eLert for 4/12/2013 - California

April 12, 2013 California's revised lien law expanded protection for contractors working on selected projects with a contract price over $1 million by requiring certain owners to provide payment security of between 15% and 25% of the contract value. This important added protection can be found in Chapter 7 of the California Civil Code, Sections 8700-8730. Please refer to complete changes in the California Chapter. B. Scott Douglass, Esquire (Contributing Author) David K. Ismay, Esquire (Contributing Author) Farella Braun + Martel, LLP

Lien Law Online Elert for 4/8/2013 - Illinois

On February 11, 2013, Governor Quinn signed House Bill 3636 into law, effective immediately. The bill addresses two sections of the Illinois Mechanics Lien Act (the “Act”): Section 16 and Section 34. With respect to Section 16, House Bill 3636 overturns the controversial Cypress Creek decision (LaSalle Bank National Association v. Cypress Creek 1, LP, 242 Ill. 2d 231 (2011)) and clarifies how to apportion foreclosure proceeds under the Act between lenders and contractors. The amended Section 16 of the Act reads as follows: No incumbrance upon land, created before or after the making of the contract for improvements under the provisions of this act, shall operate upon the building erected, or materials furnished until a lien in favor of the persons having done work or furnished material (hereinafter "lien creditor") shall have been satisfied, and upon any questions arising between incumbrancers and lien creditors, all previous incumbrances shall be preferred only to the extent of the value of the land at the time of making of the contract for improvements, but shall not be preferred to the value of any subsequent improvements, and each lien creditor shall be preferred to the value of all the subsequent improvements erected on said premises, whether or not provided by the lien creditor, and the court shall ascertain by jury or otherwise, as the case may require, what proportion of the proceeds of any sale shall be paid to the several parties in interest. All incumbrances, whether by mortgage, judgment or otherwise, charged and shown to be fraudulent, in respect to creditors, may be set aside by the court, and the premises freed and discharged from such fraudulent incumbrance. When the proceeds of a sale are insufficient to satisfy the claims of both previous incumbrancers and lien creditors, the proceeds of the sale shall be distributed as follows: (i) any previous incumbrancers shall have a paramount lien in the portion of the proceeds attributable to the value of the land at the time of making of the contract for improvements; and (ii) any lien creditors shall have a paramount lien in the portion of the proceeds attributable to the value of all subsequent improvements made to the property. The amended Section 16 settles the dispute created by Cypress Creek by giving contractors preference over a prior incumbrancer to the extent of all improvements to the property, including improvements provided by other contractors. House Bill 3636 also amended Section 34 of the Act. Section 34 allows an owner to serve on a mechanic's lien claimant a notice to proceed to file suit and if not done in thirty days the lien is extinguished. The notice that is given must provide a warning in at least 10 point bold face type: Failure to respond to this notice within 30 days after receipt, as required by Section 34 of the Mechanic's Lien Act, shall result in the forfeiture of the referenced lien.