SUMMARY OF MECHANICS LIEN LAW FOR ALABAMA

Transcription

1 SUMMARY OF MECHANICS LIEN LAW FOR ALABAMA Section Contents Pre-lien Notice(s) Name of Notice Who Must Use This Notice When How to Serve Verified or notarized? Section Contents Mechanic s Lien Who is Entitled to a Lien? When to File/Record Where to File/Record How to Serve Amount of Lien Property Subject to the Lien Furnishing Information Verified or Notarized Priorities Lien Release Bond Miscellaneous Issues Section Contents Lawsuit to Foreclose Lien Introduction When Where to File Arbitration Need a Lawyer? Page 1 of 6

2 General Notes Be Careful: The courts consider a mechanic s lien to be a privilege and not a right. You receive its benefits only if you strictly adhere to the state law requirements. Bottom line: miss a deadline by one day and you have lost it. Unlike other areas of the law where you can argue equities, find technical exceptions, and lawful excuses, there is no forgiveness here. In this case, knowledge is not only power, it s a necessity. This state requires writing down dates for at least three documents: a) Notice to Owner; b) Mechanic s Lien; and c) lawsuit to foreclose the mechanic s lien. Write down all the deadlines in your calendar. Use a highlighter or red pen. If you have a staff, use a fail safe system by doubling up and putting it in their calendar also. This reminds you twice. The first calendar entry should be two weeks before the due date as a preliminary reminder. On the second calendar entry, do a white lie to yourself. Put the due date as one week before it is actually due as insurance in case you get busy or need legal advice. Time is money. You will waste a lot of valuable time running around and doing it at the last moment, as opposed to doing it early. PRELIEN NOTICE This state requires a Notice be sent out before the mechanic s lien is filed/recorded. For simplicity, this notice will be referred to as a Prelien Notice. The basic information on this Notice is as follows: Name of Notice: Notice to Owner (Prior to Performance) and a Notice to Owner (Unpaid Balance) Who Must Use this Notice: When: All contractors, subcontractors, laborers, and material/equipment suppliers who do not have a direct contract with the owner or the owner s agent. For example, a general contractor with a direct verbal or written contract with the owner who acts as the prime is not required to give the Notice. There are no time deadlines as to when you have to file the Prelien Notice. All that is required is that the Prelien Notice be served before you file or record the Mechanic s Lien. It is just the opposite as to the Mechanic s Lien, which is required to be served within strict time deadlines as described below. Page 2 of 6

3 How to Serve: Verified or Notarized?: Serve by certified mail, return receipt requested. A verified notice simply means you sign it and are representing that the contents are true and accurate. A notarized notice is signed in front of a Notary Public or other official. A verified notice is all that is required in this state. MECHANICS LIENS Name of Lien: Who is Entitled to a Lien: Statement of Lien. A mechanic s lien is primarily for general contractors, subcontractors, laborers, as well as material/equipment suppliers. But it also covers an architect or engineer who prepares construction drawings, plans, or specifications. For these design professionals to get a lien, there must be actual construction started. There is a running debate in Alabama as to whether these design professionals will receive a lien if they do not monitor, supervise, or provide contract administration on an actual job site as to their plans and/or specifications. Surveyors (as to construction stakes and drawing maps), as well as a supplier of materials or equipment to another supplier are not entitled to a lien.. When to File/ Record: See Time Deadlines table below. Where to File/Record: How to Serve: Amount of Lien: Office of the Judge of Probate of the county where the construction was performed. After you file, serve by certified mail, return receipt requested. Primarily for unpaid labor, material, and equipment supplied. Also includes interest at the rate provided for in the contract between the parties or the maximum rate allowed by Alabama law. Attorney s fees are included only if they are provided for in the contract between the parties. Page 3 of 6

4 Property Subject to the Lien: Furnishing Information: Verified or Notarized?: When a construction project is situated in a city or town, the lien is on the building and all the surrounding land on the entire lot. When the construction project is not located in a city or town, the lien is on the building and an additional one acre of land surrounding it. This one acre of land must surround and be immediately adjacent to the building. When you do not have an accurate description of exactly what this one acre is, your Statement of Lien can simply state one acre of land surrounding and contiguous to the building. Upon request, the general should furnish others with information about the owner so the required notices and lien can be filled out properly. Must be both verified and notarized. Priorities: Lien Release Bond: Miscellaneous Issues: A Mechanic s Lien first attaches at the instant work by any contractor is performed on the project. Under Alabama law, commencement is interpreted to mean the time when material is incorporated into the construction site or delivered to the actual site. Once a single contractor or material supplier furnishes labor or materials, everyone else benefits by this and gets a lien relating back to that moment. This means that if a mortgage is executed or recorded after the work starts, it will be behind or junior to all Mechanics Liens. On the other hand, if a mortgage is executed and/or recorded before the work begins, that mortgage will have priority over the Mechanic s Lien. The lien will be discharged upon depositing with the court money or the filing of a surety bond in an amount equal to the figure in the lien plus interest at 8% per year for three years plus $ to apply to any court costs. Under Alabama law, there are two types of liens: 1) a full price lien; and 2) a unpaid balance lien. Most states allow a lien to be filed on behalf of any subcontractor, general contractor, or material supplier. However, Alabama appears to allow the full price lien only for material and equipment suppliers who furnish their wares either directly to the contractor or subcontractor. In other words, this State gives special protection to suppliers of material, as opposed to subs and generals. The latter do not get the protection of this special Page 4 of 6

5 lien. Why? Probably because suppliers have less control over the process and are considered more innocent in the eyes of the law whether this is true or not.. The full price lien is available only if the material supplier has served a Notice to Owner (Prior to Performance) before furnishing those materials. If this is done, the material supplier gets a lien for all the unpaid materials, even if the owner later pays all monies under the contract with the general and it never trickles down to the suppliers. The effect is that the owner would have to pay twice in such a situation. This is important because the other type of lien in Alabama only allows a material supplier to get the amount of materials included in the unpaid balance owed by the owner to the general. If the owner does not owe the contractor any money or has legitimate back charges, this means the unpaid material would not be payable. The owner is then given a period of time to contest whether or not the materials are properly supplied to the site. For example, the owner could claim it is not part of his or her contract or that it was something that applies so some other job site. It would appear the owner would have to have a legitmate reason to object, which in most cases would not occur. If that person does not contest it, the supplier can later file the full price lien for the entire amount of unpaid materials. If contested no problem the suppliers simply does not ship or furnish the material. A lot of suppliers do not send out their Notice to Owner before furnishing the materials. But why not? It is simply a permissible way to inform the owner of what is transpiring on the job. The unpaid balance lien is totally different it is only for the amount of the unpaid balance held by the owner and owed to the general contractor. It requires the prior filing of the Notice to Owner (Unpaid Balance). If there is no money left, there is no lien. The owner in such a case will not pay twice. So, serve your Notice to Owner (Unpaid Balance) early to prevent this from happening. Making matters even more confusing, a laborer employed directly by the owner is entitled to a full price lien. However, laborers employed by contractors or subcontractors are only entitled to an unpaid balance lien. Page 5 of 6

6 LAWSUIT TO FORECLOSE LIEN Introduction: When: Where to File: Arbitration: Your lien is not valid forever. Because it directly affects the owner s title, it has a limited shelf life and must be enforced within a short period of time. That enforcement is done by filing a lawsuit to foreclose. Just like the time deadlines for a Pre- Lien or Mechanic s Lien, the courts strictly construe these time limits which are called statutes of limitation. Again, if you are literally one day late, the lien is ineffectual. A lawsuit must be commenced within six months after the maturity of the entire indebtedness secured by the lien. The courts have construed this to mean the time when the debt is due and payable. The court can probably construe this date as the day the last items of work or materials were furnished by you to the site, unless your contract provides otherwise. When the amount of the lien exceeds $50.00, the lawsuit is filed in the Circuit Court of the county where the construction site is located. Many construction contracts state that all disputes will be decided by binding arbitration, as opposed to a court proceeding by judge or jury. In fact, it has long been a tradition to do so in the construction industry. Arbitration is usually quicker and less costly, especially because it cuts down on expensive discovery. The decision is final and binding, with no right to appeal. You lose your right for a jury trial, but few contractors want that in the first place. You usually pick an experienced construction attorney or retired judge to hear the case in their conference room. It is just like a court proceeding with the same general rules of evidence, but more informal. On the other hand, you can only foreclose your lien through a court proceeding, not arbitration. So, how do you keep your arbitration rights and at the same time preserve your lien rights? Simple. You bring a lawsuit to protect the lien and then immediately request the court to stay the court proceedings. When arbitration is done, you go back to court and turn the arbitration award into a judgment. Need a Lawyer? It is recommended you hire an attorney to file and prosecute the lawsuit. If you cannot afford one, you might get a lawyer to prepare the papers while you act as your own attorney in pro per or pro se. Page 6 of 6