Over the past holiday season, I was at a Christmas party discussing with a friend of mine who runs an electrical supply company here in South Louisiana, the intricacies of notice provisions before a company like his can file a lien on a private project. Others party-goers probably thought our conversation boring, but we were intrigued. This conversation got me thinking that I should report to the supply world what my friend did not understand…
Here at the Wolfe Law Group we love liens. We file them for clients and recommend them to all others out there as a tool to preserve rights if, and often when, funds dry up and you are not paid on a construction project. Part of the privileged class under the Louisiana Private Works Act (La R.S. 9:4801 et al), are suppliers.
There are two types of suppliers protected under this act. Suppliers who lease equipment to contractors (“Lessors”) and suppliers who provide the materials to be used in the project (“Suppliers”).
EQUIPMENT RENTAL (see La R.S. Art. 9:4802(G)(1))
For Lessors, these companies need to deliver a copy of the lease agreement to the property owner and contractor within ten (10) days of when the leased equipment is delivered to the site. This notice is required as in most states to put all relevant parties on notice of potential future claims. So for companies who deliver equipment to job-sites as a rental, it is PARAMOUNT that you send out this notice so that you can file a valid lien after not getting paid. Then with your properly filed lien you can go after the party you have a lease agreement with and the property owner, general contractor and as a last resort you can foreclose on the property! Very strong rights indeed.
MATERIAL SUPPLIERS (see La R.S. Art. 9:4802(G)(2-3))
Next, for supply houses, such as plumbing materials, and electrical supplies – these companies also need to send out a notice to the property owner and the general contractor after delivery of goods. The Supplier needs to send notice of non-payment to the owner at least ten (10) days before filing a lien. Notice needs to be sent by certified mail return receipt and needs to have the name, address of the Supplier, description of materials provided, description of the property and the total amount owed, plus interest and fees. Also the Supplier needs to put the hiring party, general contractor and owner on notice of the items list above within seventy-five (75) days of the last month that the materials were delivered to the project via certified mail return receipt – or no later that then lien period. Strategically it may be best to send out one notice after the goods are delivered to all the parties above with the required information, just to preserve the right to file your lien.
These notice provisions can be tedious and if not followed to the letter of the law, will result in an invalid lien. The notice practice should become a staple in the administration of the aforementioned types of companies. My office constantly invalidates liens that were not filed correctly. We also file a number of notices and liens which are filed correctly. General contractors and owners pay lien holders typically first because of the added security.
Bottom line – all of the successful rental and supply companies have these notice mechanisms in place. If you are a company who plans on competing in this arena, then following notice laws is always a smart plan.