SUMMARY OF MECHANICS LIEN LAW FOR KANSAS. with Changes in 2011

Transcription

1 SUMMARY OF MECHANICS LIEN LAW FOR KANSAS with Changes in 2011 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 10

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. In this State you will be writing down dates for at least four documents: a) Warning Statement; b) Notice of Intent to Perform; c) Mechanic s Lien; and d) 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 NOTICES This state requires Notices be sent out before the mechanic s lien is filed/recorded. For simplicity, these notices will be referred to as a Prelien Notices. The basic information on these Notices is as follows: Name of Notice: Warning Statement Who Must Use this Notice: When: Subcontractors, laborers, and suppliers who perform work on pre-existing residential property must serve the owner with a separate statement, before filing their mechanic s lien, titled, Warning Statement. This involves repair, alteration, or remodeling of residential property that is occupied by no more than 2 families and which is not used commercially. In other words, this applies to remodeling of a residence that has already been built. It generally informs the owner of the possibility of mechanics liens if proper payment is not made for the project. See Time Deadlines table. Page 2 of 10

3 How to Serve: Although the statute does not describe the manner of service, it is recommended that the owner be served by certified mail, return receipt requested. Name of Notice: Notice of Intent to Perform Who Must use this Notice: When: How to Serve: A subcontractor, laborer, or supplier who is working on new residential construction for 2 or fewer families that is not for commercial use. This applies to the construction of a new home as spec or custom. It is not required for construction to an existing residence. So, if the house is being built from scratch, the notice is required. If for example, you were renovating the bathroom of an existing home, it would not be required. Instead, the subcontractor or supplier serves the Warning Statement above. See Time Deadlines table. The Notice is first filed in the office of the Clerk of the District Court in the county where the property is located. The owner is then served by certified mail, return receipt requested. If you are constructing a new residence either spec or custom as described above, it is crucial that the notice to the recorded prior to closing escrow and transfer of the deed to the new homeowners. A lien is only valid if this occurs. As long as the Notice is filed before that date, the new owner will take subject to any future mechanic s lien. However, if the Notice is filed after passage of title to the new owner, no mechanic s lien is allowed against that new owner s interest. Verified or Notarized?: Failure to File Prelien Notice: The form is required to be notarized but does not need to be verified. Even though a subcontractor or supplier does not give a Notice of Intent to Perform, the person is still entitled to file a mechanic s lien. However, as stated above, the lien will not be any good if a new owner has taken title before the filing of such notices. Who is Entitled to a Lien: MECHANICS LIENS A mechanic s lien is primarily for general contractors, subcontractors, laborers, as well as material/equipment Page 3 of 10

4 suppliers. Subcontractors and suppliers are entitled to a lien only if they have a direct contract with the general contractor. This differs from most states which allow mechanics liens for sub-subcontractors on private projects. As to material suppliers, the materials must be used or consumed on the project. Merely delivering materials to the site is not sufficient. They must actually be used in the construction project to allow a mechanic s lien. If the material is consumed in the project, the transportation costs of the material can also be included in a lien. Architectural and engineering services are subject to a lien as long as actual construction has commenced. If an architect or engineer performs services and the project never gets off the ground, a lien is not allowed. Other examples of allowable lien claims would be for lumber furnished and used in making forms for concrete, dirt furnished for grading a lot, and mileage expenses. Although previous law did not allow liens for furnishing/renting equipment and supplies, the new statute does. Although a laborer is entitled to a lien, the employee of a contractor or subcontractor who is not paid for his or her wages cannot file a lien. This is because they are acting through the subcontractor or general contractor, who is the person who must file the lien. A supplier to a subcontractor is entitled to a lien. A supplier to a supplier is not entitled to a lien. A supplier to a subsubcontractor is not entitled to a lien, either. Other examples of the kind of work or material that would not qualify for a mechanic s lien is as follows: A. Material for a movable cupboard B. Material for improvement of an oil refinery at the request of the tenant when it was not used to repair or improve the property C. Windows custom-built for the project which were never consumed D. Removal of hazardous waste Page 4 of 10

5 When to File/ Record: See Time Deadlines table. General Contractors. They get four months on either residential or commercial projects to file a lien after the last of labor or materials is furnished to the job. Exception: If within that for months, the contractor files a Notice of Extension of Lien, the period is extended to five months. However, this is only allowed as to commercial projects. That Notice of Extension is filed with the office of the district court of the county in which the project is located. It is then mailed to the owner by certified and regular mail. No time limit is stated, so it is suggested you mail this immediately thereafter to be safe. Sub-contractors and suppliers. They get three months on either residential or commercial projects after they last furnish labor and materials on their portion of the work. Exception: If within that three months, the subcontractor or supplier files a Notice of Extension of Lien, the period is extended to five months. However, as stated above, this is only allowed as to commercial projects. That Notice of Extension is filed with the same office of the district court of the county in which the project is located. It is then mailed to the owner as well as general contractor by certified and regular mail. Again, no time limit is stated, so it is suggested you mail this immediately thereafter to be safe. Why should you consider filing the Notice of Extension? It provides valuable time to try your hand at a settlement and/or to meet with and discuss matters with your attorney. The best time to settle is after you have made a demand to be paid and before the filing of the lien. This is when the parties, wishing to avoid protracted courts costs and attorney s fees, are most motivated to settle. The time starts ticking for the recording of a mechanic s lien after the last labor and materials is furnished to the project. For this reason, the completion date is very important in computing the time deadlines. Only work that is necessary to complete the contract will extend the lien period. This would presumably mean that call-back or warranty work, namely, going back and repairing items that you have already installed, would not extend the time period. Page 5 of 10

6 Where to File/Record: How to Serve: The lien is filed with the clerk of the district court in county where the project is located. General Contractor s Lien. Serve on the owner(s) by both certified and regular mail. If there is more than one owner (for example husband and wife), service on one owner is sufficient. Subcontractor s and Suppliers. Serve the owner, or any one of them, by certified mail. This is presumed sufficient as the statute describes it as restricted mail ( c). Oddly enough, this statute, as opposed to the one describing service of a general contractor s lien ( ), does not require both certified and regular mail. But to be safe, both are recommended. If the owner(s) are out of state, they will have to be personally served by a process server, just like a summons and complaint. If after due diligence you are unable to ascertain the name and address of the owner(s), you are entitled to post a copy of the lien statement in a conspicuous place on the premises (usually the front door). Although not required, it is also recommended to serve the party you have a contract with by certified mail. In other words, if you are a subcontractor, you would serve the general contractor by regular certified mail. Amount of Lien: Property Subject to the Lien: Primarily for unpaid labor, material, and equipment supplied. Interest can be included in the lien only if it is part of the contract between the owner and general contractor. For all others, including suppliers and subcontractors, they cannot receive contract interest because they do not have a direct contract with the owner. A mechanic s lien applies only to private projects. No lien is allowed in public projects against government property. A lien can be against the tenant s interest in a lease and leasehold improvements. However, the general rule is that the lien will not go against the landlord s interest. There are two exceptions: A. If the lease allows the improvements and the expense of the improvements is deducted from the rentals B. The landlord directs the work to be done Page 6 of 10

7 C. The tenant acts as the agent of the landlord with the knowledge and consent of the landlord. Note, however, that just because the landlord knows about the work does not mean he or she is liable. Furnishing Information: Verified or Notarized?: Priorities: Lien Release Bond: Upon request, the general should furnish others with information about the owner so the required notices and lien can be filled out properly. A verified notice simply means you sign it and are representing 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. The lien must be both notarized and verified. As between mechanic s lien claimants, the court will order them to be paid in proportion to the amount of their liens. It does not make any difference who filed their lien first. The owner may execute a surety bond for the discharge of a lien. The claimant then proceeds normally through court and if successful, will enforce its rights against the bond but not the property. Miscellaneous Issues: Contents of Mechanic s Lien: The lien must identify the owner. Remember that the Registrar of Deeds Office will have the latest conveyance of the property and this should tell you the exact name of the owner. Use this information if you have any doubts. There must also be an adequate description of the property. Obviously, a legal description is best, but if this is not available, make sure you describe the property with as much specificity as you have at hand. The courts say it must be a description that should enable a person familiar with the locality to identify the premises with reasonable certainty, to the exclusion of others. But recently the courts of this State have clamped down on this liberality of description. They now apply very strict rules as to the description of the property subject to the lien. If it is not Page 7 of 10

8 precisely correct, the lien will be invalid. In the case of Buchanan v. Overley 2008, WL the lien was struck down because of an error in the property description in the lien itself, although the attachments clearly delineated an adequate address. Make sure you are especially careful in this regard. You must also adequately describe the amount of the lien. By far, the best way is to attach unpaid invoices. The statute requires a reasonably itemized statement. It must be specific enough to let the owner know what work was completed and to be able to critique whether or not the charges are fair. 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. Within one year from the date of filing the lien statement. In the county in which the property 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. Page 8 of 10

9 Need a Lawyer? In this country, every individual has the statutory right to represent themselves. This means they can prepare all necessary papers, appear at hearings, and actually try the case. In so doing, the court considers you to be acting either in pro se or pro per. Before making this decision, consider the following factors: 1. You are a professional and thoroughly know the ins and outs of not only the construction industry but of the project itself. The best lawyer on his or her best day will probably not know more than 50% of what you know. 2. How is your public speaking abilities? If you are uncomfortable speaking to a group, you will even more uncomfortable in court or arbitration. You could be the sharpest wit in town but may not be able to present your arguments. Remember, appearing uncomfortable is perceived as having deficiencies in your case. People usually think that if you are not comfortable about your own facts, then they must not be that strong. 3. If the other side has a lawyer, you might want to think twice about representing yourself. You will certainly know the facts quite well, but you may be blindsided by legal technicalities. 4. You may also want to think twice if this is a really nasty and emotional case. In other words, if the other side is going for blood. Having a lawyer can shelter you from this emotional trauma. No matter how strong you are, lawsuits are taxing not only on your time, but on your physical and emotional energies. 5. If you have a good case in which you have complied with technicalities and performed good work, you are essentially engaging in a collection action. These actions are typically very simple because there are few defenses or defects alleged by the other side. It makes it easier for you to represent yourself because it is more a question of when and how much they will pay as opposed to whether you will win at all. 6. If you have a binding arbitration provision, you may consider representing yourself. These proceedings are much more informal and the arbitrator tends to give you more leeway. There are also fewer rules and not they are usually Page 9 of 10

10 not quite as strict. 7. You could consider representing yourself but get advice along the way from a lawyer. It is much cheaper that way. On the other hand, the lawyer cannot watch over every move and you might slip up. Many times lawyers can also help you with preparing the forms, simply putting your name on the pleading. You can also bring in your lawyer at the end to actually try the case. 8. Judges and courts do not give legal advice. They only help you with what forms to use. However, clerks can be invaluable in steering you in the right direction as far as where to file, time limitations, the nature of the form or pleading, etc. But, remember when it comes right down to the ultimate advice, they cannot help you. 9. Judges usually treat you the same as an attorney which means they expect strict compliance with the rules. Although some judges give you more slack, don t count on it. 10. The biggest dilemma is whether you should hire an attorney for a smaller case, typically in the $5,000 to $10,000 range. You have to watch this because you may eat up that amount in attorney s fees. You never make money on lawsuits, only lawyers do. Try to settle for the best price you can get and move on. Page 10 of 10