Posts Tagged ‘Lien Filing’

Sworn Statement of Amount Due – Louisiana’s Public Lien

Here at Wolfe Law Group, I have been blogging a lot lately on liens for both public and private projects (See other posts here). Anytime a property is owned by and arm of the state then you are dealing with a public project. Although, this seems simple, many contractors do not always see the connection. The reason why so many disputes are happening now is because public projects have dominated in the years of the poor economy. Contractors on these projects need to know the rules so that they can get paid. (see La. R.S. §38:2241 et seq.)

Since the state owns the land, there are no security devices, such as a lien that can attach to the land and call for its foreclosure in the event of default or non-payment. Therefore the state has come up with its own security device to give contractors and laborers a way to collect when not receiving payment.  Here we have the Louisiana coined term: Sworn Statement of Amount Due. La. R.S. §38:2242, which is Louisiana’s version of a public lien. This document needs to be filed by the subcontractor or laborer within 45 days of when the work was accepted by the government body overseeing the project. Id.

One way for a contractor who has a sub on any tier below it to cancel the Sworn Statement of Amount Due filed, is to “bond off” the lien. La R.S. §38:2242.2. This mechanism allows for the higher tier contractor to provide security or cash at an amount 125% of the total lien. Id. At this juncture the property will be clear but there will be evidence of the bonded off lien still held with the parish mortgage office. This is pretty common practice so that higher tier companies keep the bond free while settling disputes with subs.

If at the end of the 45 day window from the state agency signing off on full completion of the project there are still any claims remaining as unpaid, then the state, claimants, or contractors may file a concursus proceeding to have the funds distributed into the registry of the court so that the parties can fight about who deserves the funds. La R.S. §38:2243. Any party may file this action, and its a very powerful tool. This is why many of the contractors will use the mechanism to “bond off” the claims, so as to prevent this process.

Finally, every parties favorite section is where attorney fees are awarded. In the Public Works Act, by statute attorney fees are permissible. This gives all parties the confidence to fight thinking that they will recover the fees. Unfortunately, recovery of attorney fees is still a difficult chore even when there is a statute. Here, La R.S. §38:2246 allows for attorney fees to any claimant who timely and properly filed its claim and recovers the full amount of the claim asserted. The reason for the emphasis in the proceeding sentence, is due to the difficulty of getting exactly what you swore was due. Claimants should be as accurate as possible when asserting claims, otherwise this statute will not apply.

The above are just a few of the many nuances contained and embedded in the Louisiana Public Works Act. Each step of the process should be carefully traversed so that the contractor does not lose rights to collect if/when the general contractor or public entity runs out of funding.

Enhanced by Zemanta
Posted in:     About Our Services, Common Topics, Construction Contracts, Filing Requirements, Litigation, Louisiana, Regulations, State & Federal Contracting, State Bond Claims  /  Tags: , , , , , , , , , ,   /   Leave a comment

Construction Lien Removal Suit in Louisiana

Attention all home owners or property owners, there is only one surefire way to have that annoying illegal lien (in Louisiana called a statement of claim and privilege) removed from the title of your property, a Mandamus action. In Louisiana and other states, a Mandamus can be used for a number of things (listed out in La R.S. §44:114) and it is a summary proceeding, meaning that it should go faster than ordinary litigation.

The Louisiana Private Works Act codified in La. R.S. §9:4801 et seq., is the origin of the rules which govern construction liens for private projects in this state. The specific statue that allows for an individual to request a Court to order the Clerk of Court to cancel a lien is La. R.S. §9:4833. The statute reads in pertinent part:

If a statement of claim or privilege is improperly filed or if the claim or privilege preserved by the filing of a statement of claim or privilege is extinguished, an owner or other interested person may require the person who has filed a statement of the claim or privilege to give a written request for cancellation in the manner provided by law directing the recorder of mortgages to cancel the statement of claim or privilege from his records.” La. R.S. §9:4833(A).

The best part about this statute is that if all of the proper notice requirements are followed and the illegal lien is not removed from the mortgage records by other means than this Mandamus proceeding, the property owner who brings the Mandamus suit is entitled to attorney fees and costs. This is huge because, this type of proceeding can cost a homeowner thousands just in legal fees. Here at Wolfe Law Group, we charge a flat rate of $3,500 for this type of proceeding, which covers all things from notices, to the actual Mandamus suit, to the trial.

Liens can be very technical and there are many instances where the letter of the law is not followed. In those instances, an owner can have the lien removed and even against the will of the party who filed the lien. As a contractor, filing a lien is very important to preserve rights against parties it did not contract with who may be liable for payment. Here at Wolfe Law Group we file liens all the time, but if your are like most contractors, funds are short and hiring an attorney can be too costly. Companies like Zlien.com are excellent resources for all things related to liens. Fortunately for lawyers and unfortunately for services like Zlien.com, enforcement of a lien and/or a Mandamus suit for removal of an illegal lien can only be filed by an attorney (or individual if self represented). I recently posted a Petition for Mandamus recently drafted and filed by Wolfe Law Group on JDSupra.com.

Bottom line: owners should file suit to have illegal liens removed from the mortgage records. If not then selling or refinancing the property will be impossible with the cloudy title. If you file suit and receive a judgment then you will be entitled to attorney fees and costs, which are provided by statute.

Posted in:     About Our Services, Construction News, Damages, Dispute A Lien, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , , , , , , ,   /   1 Comment

Litigation Topics for Prime / Subcontractor Contracts

I had a speaking engagement today here in Kenner, Louisiana (a suburb of New Orleans) whereby I had the pleasure of speaking to a group of contractors and architects regarding construction contracts. The bulk of the discussion focused on the most contested provisions within construction contracts.

The information is very helpful to contractors and can be used a resource when a contractor begins the contracting phase of a construction project to help get a better understanding of what is going on within the contract documents.

Prime/Subcontractors Contracts

Contracts between prime/general contractors and their subcontractors make up a vital link in the construction project chain. Here both parties need to negotiate terms to better protect when a dispute arises. A well crafted contract can better protect a prime and/or a sub when default arises. Typically subcontractors are at the mercy of the prime. A good subcontractor will have his attorney review any agreement to make sure that the deal is an even one.

AIA – American Institute of Architects is the most common standard form contracts in the construction industry. AIA contracts are a good starting point and offer contracts for Prime/sub relationships, Architect/owner, Owner/Prime, and any other design professional/contractor relationship that may exist.

• Commonly litigated subcontract provisions

There are a number of provisions which could be contained in a prime/subcontractor contract that need to raise a red flag when present and should be negotiated by either party so as to keep the contract from becoming one-sided.

1. Incorporation by Reference Clauses: (flow-up & flow-down provisions)

  • a Flow-down provision in a prime/sub contract will incorporate by reference terms and provisions of the owner/prime contract;
  • conversely, a Flow-up provision incorporates the duties owed by the owner to the prime into the prime/sub contract;
  • Many times parties enter into these agreements with out ever seeing the referenced document making them susceptible to unknown provisions;
  • Enforcement depends on the reciprocality of the provisions and lack of ambiguity

2. Scope of Work Provisions

  • Prime contractors want a broad scope of work provision with subs so that they can pin other work to them later on if needed;
  • Subs should demand very specific scope of work provisions so as to know exactly what work is expected and what exactly they have bid on;
  • This provision can incorporate other documents such as plans and specifications;
  • Provision needed for extra work or change order if work called for is outside of the scope;

3. Change Order and Extra Work Provisions

  • Very popular area for dispute in construction contracts – changes are always happening
  • There should be a clear provision in the contract outlining the process whereby CO’s are made and approved;
  • Define change order – modification to work already contemplated by the agreement; (ie different materials)
  • Define extra – item of work beyond the original scope of work that is added during construction;
  • MAKE SURE change orders and/or extras are in writing;

4. Notice Provisions

  • Found in various places within a prime/sub contract
  • Very important risk-shifiting devices – can determine a win or loss regarding a claim

5. Indemnity Clauses

  • Typically these trickle down the line Owner -> Prime -> Sub
  • These are generally enforceable, Subs should be careful and not allow indemnity for negligence of another party
  • Insurance can be purchased by prime or sub to cover the indemnity obligation

6. No Damages for Delay Clauses

  • Owners and Primes try to insert “no damage for delay” provisions in contracts for protection against unforeseen delays
  • Parties want to check all referencing documents to see if this provision is in there

7. LD’s – Liquidated Damages Provisions

  • Very helpful provisions because the pre-determine delay damages, usually on a per day basis;
  • Enforceable unless determined to be a penalty or if they are a “one- size fits all” provision;
  • LD’s are a good way to measure delay damage but can enhance the need for Contractor/Sub to accelerate work to avoid further damage, leading to defects and workmanship issues;
  • For LD’s to apply the contractors work must be a substantial factor in the delay;

8. Lien Waivers

  • reduce the chance for encumbrances to be placed on the title of the property;
  • Usually not enforceable if lien waiver required before work performed;
  • A good tool for Prime and Owner to reduce exposure;
  • Can be used in an incremental fashion as payments are distributed

9. “Pay-when-paid” v. “Pay-if-paid”

  • Pay-if-paid is defined as a subcontractor gets paid by the general contractor only if the owner pays the general contractor for that subcontractor’s work.” Requires a condition precedent.
  • Pay-when-paid in contrast to the pay-if-paid; a pay-when-paid clause does not establish a condition precedent, but merely creates a timing mechanism for the general contractor’s payment to the subcontractor.

10. Retainage

  • Typically 5%-10% of each payment will be withheld by the Owner/Prime until a later date, such as substantial completion
  • Its purpose is to keep a pool of money to remedy any defects in workmanship by that sub

11. Termination provisions

  • Termination for Cause
  • Usually nonpayment, excessive delay, insolvency, or convenience are reasons to terminate the contract

12. ADR Clause (Arbitration/Mediation clauses)

  • Arbitration (most popular) – binding way to avoid litigation;
  • Mediation – non-binding way to avoid litigation;
  • Both can be effective, typically arbitration can be more intimidating due to its binding and no (very limited) ability to appeal

13. Attorney fee provisions

  • Very popular as no one likes to pay an attorney!
  • Many provisions will say that the unsuccessful party must pay attorney fees but others to be careful will put the burden on one party
  • Primes and subs should include an attorney fee provision in all contracts
  • Good to be specific on the provision and include for litigation and ADR

14. Forum selection & choice of law

  • If working out of state, make sure you know which venue a dispute will be held in;
  • This can be a very costly provision

(list partially obtained from the ABA’s Fundamentals of Construction Law)

 

Posted in:     Arbitration & ADR, Change Orders, Construction Contracts, Construction News, Damages, Delays, Dispute A Lien, Disputes, Insurance, Litigation, Louisiana, Mechanics Lien  /  Tags: , , , , ,   /   2 Comments

Washington Law Protects Contractors from Dangers of Frivolous Lien Statute

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

What Costs / Labor To Include In Your Lien?

It’s been an interesting week on the web as it relates to mechanic’s liens, as I’ve run across a number of web posts about the types of services that can be included in a lien.

Let’s look at the matter theoretically.   Construction lien laws are normally drafted to protect contractors, who invest labor and expense into the improvement of a property.  However, since the laws also balance the property rights of persons or organizations, each state certainly does something to qualify what types of labor and expense can be represented in a lien, and which cannot.

The question here, therefore, is quite simple:   have you performed work or provided materials that can be the subject of a lien?

It’s one of the most important questions a contractor or supplier can ask when determining how to best collect on a non-paying account or project.   If you work does not qualify for a lien, for example, there is no need to even consider if notice is required and other lien filing requirements.

It’s important to consult the laws or your particular state to determine what type of materials and labor can be the subject of a lien, and which cannot.  However, two recently decided cases in Virginia and Kentucky are revealing of some general principals that are followed by most states.  The principal is essentially this:  you can only lien for labor and materials that actually go into improving the property.

What does this exclude?

In Virginia, Virginia Lawyers Weekly reports that a Hanover County Circuit Court invalidated a mechanic’s lien filed by a contractor that incurred costs in anticipation of construction of a steel building, but did not provide labor or materials actually employed in construction of the building.

The case is captioned Dallan Construction Co. v. Super Structures General Contractors, Inc, and can be downloaded here.

Similarly, in Kentucky, the Kentucky Court of Appeals held that “mowing, trimming, edging and street cleaning” did not “permanently improve the property,” and therefore, a mechanics lien was not allowed to be filed for the services provided.  That case is discussed at the South Carolina Community Association Law Blog, and is captioned Steeplechase Subdivision Homeowners Association, Inc. v. Thomas, Ky. Ct. App. 2008.

Posted in:     Filing Requirements, Mechanics Lien  /  Tags: , , , , , , , ,   /   2 Comments