So you’ve completed your work but now you’re running into problems getting paid for the job. As most people in that situation are aware, the Private Works Act (should that be the applicable act) provides very specific instructions for preserving your claims and privileges in this situation. In common terms, the PWA allows you to lien property in order to secure your right to payment. What many people do not know, however, is that there are very specific limitations on this preservation of rights. The subject discussed here is one such limitation: the requirement of filing a notice of contract for certain projects. The notice of contract filing is important because, depending on the amount of the contract, the filing date will determine the time period in which one can file a lien. It is a rather nuanced area of the law, but here we’ll break it down piece by piece.
What is a Notice of Contract?
When the homeowner and the contractor execute a contract, in order for certain parties to later preserve their claims and privileges, a notice of contract must be filed with the mortgage office in the parish where the work is being performed. Louisiana Revised Statute 9:4831. The information required to be contained in the notice is outlined in Louisiana Revised Statute 9:4811, and includes: the signatures of the owner and the contractor; the legal property description of the immovable where work is being performed’ the parties to the contract and their mailing addresses; the price; when payment of that price is to be received; and a general description of the work to be done. When information is omitted, the notice will only be found improper if that incorrect or omitted information is either the parties and their addresses or if the immovable is incorrectly identified. In those two scenarios, the notice of contract will be deemed improperly filed.
An important element in determining just what the notice of contract is is also a discussion of what it is not. The notice of contract is not the contract document! When you look through the PWA, the above is the only required information that must be submitted as a “notice of contract.” Depending on the scope of work, the notice of contract might only be one page long! Why is this important? The short answer: money. Let’s use Orleans Parish as an example. In Orleans Parish, filing a notice of contract will cost you $60 for the first two pages and $13 for each page thereafter. If parties were required to file the contract as opposed to a notice of contract, they would be on the hook for hundreds of dollars just in filing fees. In paring down the information needed for the notice, though, the filing can be extraordinarily cheaper.
Why File a Notice of Contract?
The filing of the notice of contract is important because it will help determine when the tolling period begins for filing liens. This is where matters become complicated. First, we must understand that there are numerous parties involved and affected by the filing of the notice. Most straightforward is the contractor. If a contractor does not file a notice of contract for projects that exceed $25,000.00, then that contractor loses his right to later file a lien. La. R.S. 9:4811. Therefore, if the contractor wants to retain the rights granted to him by the PWA, on projects of a certain sum, the notice of contract must be filed before work begins, which is defined by Louisiana Revised Statute 9:4820. If the contractor is entitled to the rights granted by Louisiana Revised Statute 9:4801, and if they have filed the notice of contract properly, then that contractor will have until sixty (60) days after the filing of the notice of termination or after substantial completion to file their lien.
The trickier calculation deals with subcontractors. The first part of Louisiana Revised Statute 9:4822 states that when a notice of contract is filed properly, then those parties granted a privilege by Louisiana Revised Statute 9:4802 (subcontractors, as well as others) will only have thirty (30) days after the filing of the notice of termination to file their lien. Note the very important difference between those provisions. In the case of a subcontractor and a proper notice of contract, the time period to calculate your lien deadline starts when a notice of termination is filed and not when the project is substantially completed. If the notice of contract is not properly filed, then the subcontractor has sixty (60) days from the filing of the notice of termination or from substantial completion to file the lien.
What Does This Mean?
The notice of contract, therefore, is pivotal in determining when a lien period terminates. For example, if a notice of contract is properly filed, but there is never any termination of work filing, a subcontractors lien period might never end. This, obviously, greatly impacts the rights of the parties to the contract. However, it is not a simple issue.
The language of the Private Works Act is very particular and phrases and terms were chosen for a very specific purpose. There is a reason why some places use “filing of notice of termination of work” versus “substantial completion of work” – it is because they are different concepts. There is a reason why there is specific information that must be included in a notice of contract and why that impacts different parties. These statutes were crafted with care and intent. Considering how important they are in determining your rights, the safest thing you can do to protect your business is to discuss the matter with an attorney. After all, we’re here to help.