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Leasing Equipment in Louisiana? How To Protect Your Lien Claim

On July 20, 2011
You are in the business of leasing heavy equipment to contractors. You are beginning to provide more and more machinery to jobsites. You just hit your first snag with payment. What do you do?

Chances are you are stuck in rough spot and have to defer to your contract for remedy. There is likely no answer for you under the lien law – unless you filed a notice of lease agreement with the owner within the appropriate time frame.

Lessors often do not learn about the dreaded notice provision until after they have been bitten by a bad customer. Both the Private Works Act and the Public Works Act each require that the Lessor of equipment to a construction project provide advance notice to the owner of the equipment’s use and existence at the jobsite.

Luckily, satisfaction of this requirement is quite simple. Under both Acts, a Lessor of movables (equipment, vehicles, etc.) must “deliver a copy of the lease to the owner not more than ten days after the movables are first placed at the site of the immovable for use in the work.” La. R.S. 38:2242(c). If the job is private and not public, you must also provide a copy of the lease to the contractor. La. R.S. 9:4802(G)(1).

The official comment for subsection G of La. R.S. 9:4802 states that the purpose of this law is to give notice to the owner and the contractor that equipment being used by a contractor is leased and thus potentially creating liability under the Private Works Act.

Though the type of delivery is not specified, it is commonplace to use hand delivery or certified mail. If hand delivery is utilized, it is important that the courier fill out a simple affidavit specifying what was delivered, when it was delivered, who it was delivered to, and where it was delivered.

Finally, the Notice of Lease Agreement does not have to be in any specific form – simply a copy of the contract should suffice. We do prefer that you use a cover sheet to inform the owner and contractor of the purpose of the delivery, reserving your rights under either La. R.S. 9:4802 (Private Works) or La. R.S. 38:2242 (Public Works).

Think Different To Send Notices of Lease Easily

So, now you know about this notice of lease requirement…but really, does your company have the time or attention to detail required to send these notices to each and every customer every time you sign a rental agreement?  It’s likely that you either don’t have the time, or if you can make the time, that it’s a waste of time for your company.

Think different about these notices…how about outsourcing them?

A company like Zlien (which was started by Wolfe Law Group founder Scott Wolfe Jr) is in the business of sending notices like the Louisiana Notice of Lease. They have many equipment rental companies who simply send them a copy of each new rental agreement, and Zlien prepares and sends the preliminary notice for them, keeping evidence of its delivery and a copy of the notice for you to access within your account at anytime.  It’s a great alternative to trying to send all of these complex notices yourself, and can be done so it will actually save you money.

Posted in:     Filing Requirements, Louisiana, Mechanics Lien  /  Tags: , , , ,   /   Leave a comment

Washington Law Protects Contractors from Dangers of Frivolous Lien Statute

On July 19, 2011

A quick word from the construction law case files:

The Court of Appeals, Division 1, out in Washington state, has refused to deem a construction lien as frivolous based upon the complexity of the construction contract at dispute. The court in SD Deacon Corp. of Washington v. Gaston Bros. Excavating, Inc., decided back in May of 2009, that the state’s “frivolous lien” statute, coded under RCW 60.04.081, requires a more in-depth analysis of factual circumstances surrounding the substance of the contract and the lien.

The court in SD Deacon further reasoned that a court can only evaluate in a frivolous lien proceeding are, by way of example, whether the lien was properly filed, signed by the proper party, properly served, and meets the statutory form requirements. Issues of substance of the lien (i.e. the contract amount, amount due or change orders) are issues which require more substantive proceedings to analyze factual circumstances.

Because the frivolous lien procedure codified in RCW 60.04.081 does not provide for such proceedings, a party seeking to extinguish a lien filing will be unsuccessful in attempting to show to the court that the lien was frivolous.

Essentially, the court’s rule is that the “lien must be so devoid of merit that the claim has no possibility of succeeding” and that “there must be findings supporting the conclusion that the lien is invalid beyond legitimate dispute.”

The Court’s ruling provides some hope for “fringe” contractors who’s claims hold some element of uncertainty, but who desperately need the security provided by a lien in order to collect payment from an uphill contractor or owner.

The frivolous lien statute was enacted to prevent fraudulent claims against contractors, by awarding successful parties attorneys fees. The ruling in the case shows that the award of fees will not be granted unless your lien fails to meet statutory form requirements.

Posted in:     Filing Requirements, Mechanics Lien, Washington  /  Tags: ,   /   Leave a comment

Why You Should Lien First (and Ask Questions Later) in Virginia

On May 18, 2010

Christopher Hill is a LEED AP and construction lawyer in Richmond, VA.  He is a member of Virginia’s Legal Elite in Construction Law and authors the Construction Law Musings blog.  You can also follow him on Twitter at  @constructionlaw.

First of all, thanks to Scott for allowing me the forum to guest post here at the Construction Law Monitor.  When I was thinking of a topic, I realized that mechanic’s liens in Virginia are extremely powerful.  Their power is particularly helpful when, like now, the construction economy is not exactly booming.

Why do I say that a lien in Virginia is so powerful?  Two reasons, 1. the lien (with one exception) takes priority over even a first mortgage or deed of trust, and 2. a lien in Virginia (assuming it is filed correctly) is perfected and enforceable as soon as it is recorded.  This one two punch creates a situation in which a construction subcontractor can suddenly move from a position of vulnerability to one of strength.  Once the lien hits the courthouse, and notice goes to the Owner, things generally start to happen:

1.  The bank gets nervous; 2.  The Owner begins to fret and squeeze the General Contractor to see why the sub has not been paid; 3.  The subcontractor’s construction attorney hopefully gets a call; and, importantly 4.  Money starts to flow (or at the very least the General Contractor is forced to file a bond with the Court to assure that the sub will be paid).  In short, until you, a construction professional who is owed money, are presented with the “fish or cut bait” scenario of having to file a suit to enforce the lien or stick with a breach of contract action, you are in the driver’s seat.  Of course, this assumes that you and your attorney have properly met the picky requirements of a Virginia mechanic’s lien.

The second point is equally important.  The fact that a commercial subcontractor or supplier does not need to perform any additional steps, aside from recording the lien, in order to perfect it means that your lien not only survives bankruptcy if filed prior to the Owner’s bankruptcy filing, it means it can be a secured lien even after bankruptcy of the Owner.  All that the bankruptcy does regarding your lien is to stop the clock on the 6 month filing deadline for the length of the stay.  I have seen more than one instance where having this secured position in a bankruptcy is the difference between pennies on the dollar and almost full recovery out of the bankruptcy.

In short, don’t wait to file your lien in hopes that you will get paid.  While I always prefer that construction professionals work things out short of litigation and enjoy representing construction pros in and around Richmond because they generally do so, now is not the time to let your lien rights lapse.  Any General Contractor or Owner that balks at your exercising your lien rights is not likely to pay in any event.  Those Owners and General Contractors that see your actions as “just business” are more likely to be folks for whom you will want to work in the future.

In sum, a mechanic’s lien, filed in a timely and proper fashion, can be, and generally is, a cost effective and powerful collection tool for Virginia contractors.  Construction professionals in Virginia should not see such liens as a last resort, but as one of the arrows in their collection quiver to be used when an Owner or General Contractor (with or without fault) fails to pay them in a timely fashion.

Posted in:     Collections, Construction Contracts, Filing Requirements, From The Experts, Mechanics Lien  /  Tags: , , , , ,   /   5 Comments

Will Your Insurance Company Cover Illnesses Associated With Chinese Drywall?

On March 22, 2010

This article was written by Chris Wilson.

Thousands of people across the country have purchased new homes that contain Chinese Drywall. Unfortunately, the result has been devastating financial and health problems. People living with Chinese drywall have had a number of health effects such as breathing difficulties, coughing, acne, asthma attacks, bloody nose, dizziness, irritated eyes, nausea, headaches, fatigue, gastrointestinal problems, rashes, sinus problems, and sore throats. As well, there are concerns that long-term exposure to Chinese drywall could cause cancer due to prolonged contact with radon. The question on many people’s minds is if their insurance company will cover their health care costs.

The claim most insurers are making regarding covering health care costs is that drywall is considered a builder defect which is not covered under a homeowners’ insurance policy. As well, they have deemed drywall a pre-existing condition that could lead to future damage, which is why insurance providers will not pay out for a claim or renew a homeowner’s policy until the drywall has been removed. They contend that it is a warranty issue and not an insurance issue. There are a number of insurers that have denied claims or canceled insurance policies based on this contention. Homeowners insurance is not designed to cover defective construction or materials; and as a result, they are not liable to pay out for the claim. It is their contention that homeowners must seek compensation from the manufacturer or a company associated with the installation of the drywall. As well, property insurance policies also have pollution exclusions; therefore, they will usually deny claims, which include any medical coverage. That is, Chinese Drywall claims involving sickness from inhaling unsafe gas odors will normally be denied because they do not fall under an insurance company’s definition of “bodily injury.”

When it comes to personal health insurance plans, you have to read the fine print of your policy to determine their definition of ‘bodily’ injury. Many insurance companies will consider a situation like this to be pollution caused by a third party so they do not cover the expenses associated with treatment. It is important to check to see if there is specific criteria outline in your health insurance policy that may result in coverage denial for treatment for drywall exposure.

Many homeowners have filed class action law suits against the manufactures, developers, general contractors, distributors, and builders, to seek compensation for their financial loss and health treatment costs. The lawsuits include claims for private nuisance, breach of warranty, breach of contract, negligence, and unjust enrichment. Most claims ask for financial compensation for medical expenses associated with illnesses resulting from inhaling toxic fumes originating from the drywall. If you have suffered the effects of drywall exposure, you need to consult with your homeowners’ insurance provider and health insurance provider to find out if the condition will be covered. If not, you should consult with a trial lawyer to learn about possible options on how to get compensation.

This article was originally posted on Wolfe Law Group’s topic-specific Chinese Drywall Blog.

Posted in:     Chinese Drywall, From The Experts  /  Tags: , , ,   /   Leave a comment

Lien on Property or Lien on Funds? It's Two Different Collection Tools

On June 12, 2009

Liens are one of the most powerful collection tools available to workers in the construction industry. Mechanics Liens are inexpensive and hard-hitting, and perhaps one of the most effective ways to collect on non-paying projects.

A properly filed construction lien can affect a property’s title, entangles multiple parties to your dispute, and helps get you paid.  Suppliers, prime/sub/sub-sub contractors and laborers all have the rights to lien a property they performed work on.

Bradley Coxe  Hodges & Coxe, PC law firm wrote some basic information within JD Supra explaining the two broad types of a mechanics’ lien-  the property or funds lien.

Property liens are the most popular and widely used in each state.  The homeowner is responsible for getting the worker paid for his completed job.  This, when filed and recorded correctly within the respective county or parish places a hold on the owner’s land preventing them from selling or turning over until the matter is determined by the courts.

The second type of lien is the lien on funds; which is when the payor, not the owner, is responsible to pay for the work.  Whomever performed work on the property that was not contracted directly with the owner can send a notice to the owner letting them know 1- they have not been paid  and 2- they should not pay whomever is in charge of getting the money (in most cases, this is the prime or general contractor)  The funds that are owed to the general or prime contractor is what has been liened.  If the general contractor has been paid after a notice was supplied to the owner, a sub-contractor can then lien the property.

This post originally appeared on the Construction Lien Blog.

Posted in:     Filing Requirements  /  Tags: , , , ,   /   Leave a comment
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