Lien Laws & Out-of-State Construction Projects (Part III)

In this third installment of my series of pitfalls in embarking on construction jobs in states in which you have not previously worked, we’ll consider differences between various state laws regarding preliminary lien notices and the claim of lien itself. First, the preliminary notices.

As a prerequisite to lien rights, almost every state requires lienors to send some form of preliminary notice to the owner early in the project. The preliminary notice introduces the lienor as a potential claimant from whom the owner must obtain releases of lien. However, the forms and requirements for service of these preliminary notices vary drastically from state to state. For example, in New Jersey, before filing a lien arising under a residential construction contract, a lien claimant must first file a Notice of Unpaid Balance and Right to File Lien within 60 days after the last date that work, services, material or equipment were provided for which payment is claimed.  In Wyoming, a prime contractor must post a notice on the construction site notifying lienors that a notice of the right to claim a lien must be served on the contractor. The lienor will lose its lien rights if it fails to comply.  And sometimes more than one notice is required, depending on the type of work and the classification of the lienor performing the work. Texas requires different preliminary notices, which may be governed by different time frames, depending, for example, on whether or not the lien involves specially fabricated goods. If you work in an unfamiliar state and don’t comply with these unfamiliar preliminary notice requirements, you could inadvertently lose your lien rights, even if you’re not paid at the conclusion of the job.

Second, requirements pertaining to the recording deadline, form, and manner of foreclosing construction liens also vary from state to state. In Vermont, a construction lien is valid for only 180 days from the time when payment became due for the last of the lienor’s work unless a notice of such lien is filed in the office of the town clerk. On the other hand, Florida requires claims of lien to be recorded within 90 days of the last day of work on the project and served upon the owner within 15 days of recording.

Many states (but not all) require specific lien language. If your company’s lien form does not comply with a state’s mandatory language, then the lien may be invalid and unenforceable. Learn about the deadlines for recording a lien, the notices that must be served around the time the lien is recorded, the lien form that must be used, and the deadline for serving the lien on the owner.

Finally, you must consider foreclosure requirements. By the time you contemplate suing to foreclose on a lien, your company has probably retained an attorney familiar with that state’s laws. Nevertheless, pay attention to deadlines and other lien foreclosure requirements.

While many states allow a lawsuit up to one year from the date on which the lien is recorded, Louisiana’s foreclosure deadline is one year after expiration of the applicable time period to record a lien, regardless of when the lien was actually recorded. In Idaho, a lien expires if contractors don’t sue to foreclose on it within six months from the date on which it was filed. This time can be extended by a partial payment or extension of credit after the lien was recorded.

To prevent a lien from expiring, most (but not all) states require a notice of lis pendens (suit pending) to be recorded in the public records with the filing of a foreclosure action. So, review state deadlines for filing suit on a lien and give your attorney sufficient time in which to prevent the lien’s inadvertent expiration.

In the next intsallment of this series, we’ll consider differences in state statutes pertaining to transfer bonds and sworn statements of account.