LOUISIANA MECHANIC S LIEN LAW

Transcription

1 LOUISIANA MECHANIC S LIEN LAW Go to: Louisiana Mechanic s Lien Forms More Info: Section Contents Pre-lien Notice(s) Name of Notice Who Must Use This Notice When How to Serve Verified or notarized? Section Contents Louisiana Mechanic s Lien Who is Entitled to a Lien? When to File/Record Where to File/Record How to Serve Amount of Lien Property Subject to the Lien Furnishing Information Verified or Notarized Priorities Lien Release Bond Miscellaneous Issues Page 1 of 12

2 Section Contents Lawsuit to Foreclose Lien Introduction When Where to File Arbitration Need a Lawyer? General Notes Be Careful: The courts consider a mechanic s lien to be a privilege and not a right. You receive its benefits only if you strictly adhere to the state law requirements. Bottom line: miss a deadline by one day and you have lost it. Unlike other areas of the law where you can argue equities, find technical exceptions, and lawful excuses, there is no forgiveness here. In this case, knowledge is not only power, it s a necessity. In Louisiana you will be writing down dates for at five documents: a) Notice of Contract; b) Notice of Lien Rights; c) Notice of Non-Payment to Owner; d) Louisiana Mechanic s Lien; and e) lawsuit to foreclose the mechanic s lien. Write down all the deadlines in your calendar. Use a highlighter or red pen. If you have a staff, use a fail safe system by doubling up and putting it in their calendar also. This reminds you twice. The first calendar entry should be two weeks before the due date as a preliminary reminder. On the second calendar entry, do a white lie to yourself. Put the due date as one week before it is actually due as insurance in case you get busy or need legal advice. Time is money. You will waste a lot of valuable time running around and doing it at the last moment, as opposed to doing it early. PRELIEN NOTICE This state requires Notices be sent out before the Louisiana mechanic s lien is filed/recorded. For simplicity, these notices will be referred to as Prelien Notices. Caution: Unfortunately, each of Louisiana s 64 parishes separately determines what is considered the acceptable form of notice. To be safe, you should seek competent legal counsel before filing these forms. On the other hand, if you file them early enough, you can be told by the county representative what changes should be made and since these can usually be done within a short period of time, you can return the same day or the next day with the correct form. The basic information on these Notices is as follows: Page 2 of 12

3 Name of Notice: Notice of Contract GENERAL CONTRACTORS Who Must Use this Notice: When: General contractors only who have a contract for more than $25,000. Even though not required, it is recommended that the same notice be given for projects under $25,000. See Time Deadlines table. How to Serve: Verified or Notarized?: The statute does not require service of the notice. However, it does require that both the general contractor and the owner sign this notice before it is filed or recorded. Although not required, the general contractor can also record a payment bond at same time of recording the Notice of Contract. A verified notice simply means you sign it and are representing the contents are true and accurate. A notarized notice is signed in front of a Notary Public or other official. This notice does not have to be verified or notarized. * * * Name of Notice: Notice of Lien Rights Who Must Use this Notice: Louisiana General contractors on residential projects only. This form of notice generally describes the mechanic s lien law to a residential owner and must be signed and dated by the owner or that person s agent. It is much easier to simply include this as part of your general contract so the owner will sign this at the same time as the rest of your contract documents. That way you do not have to formally serve the owner. Make sure you give a copy to the owner. If requested by any subcontractors or suppliers, you must furnish a copy of this signed notice to them. If the general contractor fails to supply the notice and have the owner sign receipt of it, and liens are filed on the property, the owner can sue the general contractor for reasonable damages and attorney s fees. However, this penalty does not apply if the general contractor has otherwise secured a surety bond for the property. SUBCONTRACTORS OR SUB-SUBCONTRACTORS (No Prelien Notice Required) Page 3 of 12

4 LESSORS OF CONSTRUCTION EQUIPMENT Name of Notice: No formal name. In most cases, a simple letter from the equipment supplier or lessor with a copy of the lease, is served on the owner and general contractor is sufficient. For example, the letter might state in substance: It is our pleasure to lease to your project the above-described (describe the items rented). This notices sent pursuant to Louisiana Revised Statutes Article 9: 4802 (G)(!) and required by law. Also under that statute, we are enclosing a copy of the rental agreement. Thank you for giving us the opportunity to be involved in your project. Who Must Use this Notice: When: How to Serve: Verified or Notarized? Lessors of equipment. See Time Deadlines table. Serve the owner and general contractor by certified mail, return receipt requested. The letter or notice does not have to be verified or notarized. Practical Problems: The Louisiana notice to be served on the owner as described above seems simple, but from a practical standpoint can be complicated and at times almost impossible. Contractors typically call in their orders from a cell phone in their truck as far as equipment needed at the job, and want it almost immediately. They do not always have the time to go into the equipment supplier s office and sign documents. And if the equipment supplier cannot comply, they will go to someone who will dispatch the equipment quickly. Technically, each time different equipment is rented, or the same equipment on different occasions, a new notice would have to be sent out. It is not unusual for the contractor or subcontractor not to know the exact name and address of the owner. Another solution is to get the contractor or subcontractor into your office and sign a Master Lease Agreement. This would have all the terms and conditions and satisfy the requirement of the statute. As far as the owner, the agreement could give the lessor it the right to insert the name and address upon being verbally informed by the contractor. That way the notice Page 4 of 12

5 can be sent out right away. MATERIAL SUPPLIERS (Residential Only) Name of Notice: Notice of Non-Payment to Owner Who Must Use this Notice: When: How to Serve: Material suppliers only who have a direct contract with the general contractor or a subcontractor on a residential project. It appears from the Louisiana statutes (R.S. 9:4802(G)(2)) that lessors of equipment do not have to give this Notice. This special notice is not required for commercial or industrial projects. See Time Deadlines table. Serve the owner by certified mail, return receipt requested. How Many Notices? In almost all states, once a pre-lien notice is given near the beginning of the job, that s it--you do not have to do it repeatedly. There is a California case that indicates if the amount in the preliminary notice becomes increased to such a large amount that the benefit of the bargain has substantially changed, you might have to re-send the notice. But in most states, there is no such requirement. Another exception is in Texas, where the third month and second month notices have to be served from and after each month in which the unpaid services were performed. And then there is Louisiana which states that the preliminary notice is due on or before 75 days from the last day of the month in which the material was delivered.... Unfortunately, in a recent case called J. Reed Contractors, Inc. vs. Roofing Supply Group, a Louisiana Circuit Court of Appeal held that it has to be served multiple times. So be aware of this fact and unfortunately act accordingly. MATERIAL SUPPLIERS (Commercial Projects Only) Name of Notice: Notice of Non-Payment to Owner Who Must Use this Notice: Material suppliers only on commercial and industrial property. It appears from the Louisiana statutes (R.S. 9:4802(G)(2)) that lessors of equipment do not have to give this Notice. This only applies to material suppliers who have a direct contract with a subcontractor and a NOTICE OF CONTRACT Page 5 of 12

6 has been recorded. This same general form is used as described above for material suppliers on residential property except the time limitations are different. When: How to Serve: See Time Deadlines table below. Serve the owner and general contractor by certified mail, return receipt requested. Note that Louisiana law is to the effect that if a person does not sign the certified mail, it is still deemed properly served. This applies to all the notices contained in this section. LOUISIANA MECHANICS LIENS Name: Statement of Claim for Privilege. Who is Entitled to a Lien: A Louisiana mechanic s lien is primarily for general contractors, subcontractors, laborers, as well as material/equipment suppliers. But it also covers architects, engineers, and surveyors, as well as their professional sub-consultants, if employed by the owner, contractor, or a subcontractor. Lessors of equipment are also covered if leased to the owner, the contractor, or subcontractor by a written lease. There is also a special provision for persons supplying fuel used for construction machinery. Suppliers who sell materials to other suppliers are not afforded lien rights. Further, material suppliers who do not have a direct contract with the owner, prime contractor, or a subcontractor, also have no lien rights. When to File/ Record: Where to File/Record: How to Serve: See Time Deadlines table. The lien is filed for registry with the Louisiana Recorder of Mortgages in the Parish in which the work is to be performed. The Recorder of Mortgages includes the office of the clerk of the court. The lien is served on the owner by certified mail, return receipt requested. If the lien claimant has a direct contract with a subcontractor, both the general contractor and the owner must be given notice of the mechanic s lien by certified mail. Page 6 of 12

7 Amount of Lien: Property Subject to the Lien: Furnishing Information: Primarily for unpaid labor, material, and equipment supplied. Also includes reasonable attorney s fees if you have an attorney s fees provision in your contract and prevail at trial as the successful party. Other damages, including impact damages and lost profits, are not allowed. A Louisiana mechanic s lien applies only to private projects. No lien is allowed in public projects against government property. Upon request, the general should furnish others with information about the owner so the required notices and lien can be filled out properly. It is very important for subcontractors and suppliers to know when the Notice of Termination (see discussion below), if any, has been filed. This is because it sets up the time limit for recording the lien. Any such person may give notice to the owner which states the amount that will be claimed under a possible lien. If such notice is given, the owner must notify that person within 3 days, specifying when the Notice of Termination was recorded or when substantial completion of the project or abandonment occurred. If the owner fails to give the notice within 10 days of the time in which liens can first be recorded, that owner can later be liable for attorney s fees and costs. Verified or Notarized?: A verified notice simply means you sign it and are representing the contents are true and accurate. A notarized notice is signed in front of a Notary Public or other official. A verified notice is all that is required in this state. The lien should be notarized and verified. Priorities: Louisiana mechanics liens take priority over a recorded mortgage, including construction mortgages if either the Notice of Contract is filed or work is begun before that mortgage is recorded. If the mortgage is recorded before that time period, it will take priority over anything on the property, except taxes and assessments or the liens of a laborer. This means that if the mortgage is recorded after the work begins or the Notice of Contract is filed, the mechanics liens will take priority. In that case, when the property is sold in the foreclosure proceeding, the monies will first go to lien claimants. The following priorities apply (in this order) among the lien claimants: A. Laborers B. Subcontractors and suppliers C. General contractors as well as architects, engineers, and surveyors Page 7 of 12

8 Lien Release Bond: Both the Louisiana mechanic s lien itself and the personal liability of the owner can be released by filing a lien release bond or cash deposit for 125% of the lien claim. At this point, the lien claimant continues the process, but when they receive judgment, they will receive money from the surety company or from the money deposited with the court. The general contractor has the option, before work begins, to record both the Notice of Contract and a payment bond. If this is recorded, the owner shall not be liable personally or have his or her property subject to a lien. Instead lien claimants will have to go against the bond. The bond is for the following amounts: Amount of Contract Amount of Bond $1 to $10, % of contract price $10,001 to $100,000 50% of contract but not less than $10,000 $100,001 to $1,000,000 One-third of contract price but not less than $50,000 More than $1,000,000 25% of contract price but not less than $333,333 If the Notice of Contract and payment bond have been timely filed, the owner can bring a special lawsuit (concursus proceeding) which names all the lien claimants and requires them to make their claims against the bond and not against the owner personally or his or her property. Miscellaneous Issues: Notice of Termination: The owner may file a Notice of Termination which is equivalent to a notice of completion in other states. This can shorten the time in which mechanic s liens are to be filed. However, the notice must certify that the Page 8 of 12

9 work is substantially completed or has been abandoned, and can be either signed by the owner or for the owner which could be either the architect or possibly the general contractor. Expunging a Lien: If a Louisiana mechanic s lien is not properly recorded or is time-barred, the owner or general contractor can give notice to the lien claimant and demand Cancellation (see Louisiana. R.S 9:4833) by certified mail. If there is a failure to do so within 10 days, action can be brought in court. If successful, there can be an award of damages and attorney s fees against the lien holder. Remember, this applies to obviously invalid liens and would not take effect if there were minor and non-prejudicial failures in the contents of the lien or if the amount of the lien stated was reasonable under the circumstances, although different from the amount awarded later at trial. The action in court is similar to a petition for writ of mandate (La R.S. 9:4833). This is one of the fastest proceedings possible in the law. Under , the suit is brought against the lien claimant and the recorder of mortgages. Because it is a summary proceeding, it can be heard between 2 days and 10 days after service. In essence, you will be conducting a mini trial. LAWSUIT TO FORECLOSE LIEN Introduction: When: Your Louisiana lien is not valid forever. Because it directly affects the owner s title, it has a limited shelf life and must be enforced within a short period of time. That enforcement is done by filing a lawsuit to foreclose. Just like the time deadlines for a Pre-Lien or Mechanic s Lien, the courts strictly construe these time limits which are called statutes of limitation. Again, if you are literally one day late, the lien is ineffectual. Within 1 year of the expiration date for filing the lien claimant s mechanic s lien. In other words, it is not 1 year after the actual recording, but 1 year after the expiration of the time in which one could record a mechanic s lien. Louisiana is the only state that allows not only the filing of a mechanic s lien against the owner s property but a direct suit by a subcontractor or supplier against the owner personally, even though there is no contract between them. Where to File: Arbitration: See a local attorney for more information. Many construction contracts state that all disputes will be decided by binding arbitration, as opposed to a court proceeding by judge or jury. In fact, it has long been a tradition to do so in the construction industry. Arbitration is usually quicker and less costly, especially because it cuts Page 9 of 12

10 Notice of Intent to Lien: down on expensive discovery. The decision is final and binding, with no right to appeal. You lose your right for a jury trial, but few contractors want that in the first place. You usually pick an experienced construction attorney or retired judge to hear the case in their conference room. It is just like a court proceeding with the same general rules of evidence, but more informal. On the other hand, you can only foreclose your lien through a court proceeding, not arbitration. So, how do you keep your arbitration rights and at the same time preserve your lien rights? Simple. You bring a lawsuit to protect the lien and then immediately request the court to stay the court proceedings. When arbitration is done, you go back to court and turn the arbitration award into a judgment. Need a Lawyer? Many times you want to give the owner or general contractor a warning shot before recording the lien. It shows you are serious in getting paid and that you are ready to take the next legal move. For this reason, many contractors, subs, and suppliers like to serve a Notice of Intent to Lien. It gives the other side 10 days to pay or else. The State of Louisiana does not have a specific statutory provision describing such a Notice. Therefore it is optional and not required in Louisiana. But it is certainly legal for you to utilize the form. In fact, most judges appreciate the fact you have given this warning shot before the recordation of the lien itself. As a matter of fact, this has become a very popular form on the National Lien Law website. If you are a subcontractor or supplier, serve both the general contractor and owner. If you are a general contractor, you simply serve the owner. The notice is not recorded or notarized. Simply send it by certified mail. Then make sure you follow-up. The Notice states a lien will be filed if payment is not made within 10 days. To show you mean business, you should record the mechanic s lien shortly thereafter. Either download a mechanic s lien form from this site, or you can use our Lien Filing Service ( ). In this country, every individual has the statutory right to represent themselves. This means they can prepare all necessary papers, appear at hearings, and actually try the case. In so doing, the court considers you to be acting either in pro se or pro per. Before making this decision, consider the following factors: Page 10 of 12

11 1. You are a professional and thoroughly know the ins and outs of not only the construction industry but of the project itself. The best lawyer on his or her best day will probably not know more than 50% of what you know. 2. How is your public speaking abilities? If you are uncomfortable speaking to a group, you will even more uncomfortable in court or arbitration. You could be the sharpest wit in town but may not be able to present your arguments. Remember, appearing uncomfortable is perceived as having deficiencies in your case. People usually think that if you are not comfortable about your own facts, then they must not be that strong. 3. If the other side has a lawyer, you might want to think twice about representing yourself. You will certainly know the facts quite well, but you may be blindsided by legal technicalities. 4. You may also want to think twice if this is a really nasty and emotional case. In other words, if the other side is going for blood. Having a lawyer can shelter you from this emotional trauma. No matter how strong you are, lawsuits are taxing not only on your time, but on your physical and emotional energies. 5. If you have a good case in which you have complied with technicalities and performed good work, you are essentially engaging in a collection action. These actions are typically very simple because there are few defenses or defects alleged by the other side. It makes it easier for you to represent yourself because it is more a question of when and how much they will pay as opposed to whether you will win at all. 6. If you have a binding arbitration provision, you may consider representing yourself. These proceedings are much more informal and the arbitrator tends to give you more leeway. There are also fewer rules and not they are usually not quite as strict. 7. You could consider representing yourself but get advice along the way from a lawyer. It is much cheaper that way. On the other hand, the lawyer cannot watch over every move and you might slip up. Many times lawyers can also help you with preparing the forms, simply putting your name on the pleading. You can also bring in your lawyer at the end to actually try the case. 8. Judges and courts do not give legal advice. They only help you with what forms to use. However, clerks can be invaluable in steering you in the right direction as far as where to file, time limitations, the nature of the form or pleading, etc. But, remember when it comes right down to the ultimate advice, they cannot help you. Page 11 of 12

12 9. Judges usually treat you the same as an attorney which means they expect strict compliance with the rules. Although some judges give you more slack, don t count on it. 10. The biggest dilemma is whether you should hire an attorney for a smaller case, typically in the $5,000 to $10,000 range. You have to watch this because you may eat up that amount in attorney s fees. You never make money on lawsuits, only lawyers do. Try to settle for the best price you can get and move on. Prepared by: Thank you for your business. Page 12 of 12