New Lien Law Changes You Don’t Want to Miss in Louisiana - Webinar

2019 Changes in Louisiana Lien Law

There were some changes to sections of the Louisiana Private Works Act during the 2019 legislative session. While Louisiana also has a Public Works Act, that act will not be addressed. There will also be no overview of the state law, only the more significant changes in the law will be addressed.  

Claims by Those Who Perform Work for the Owner – 9:4801

Fortunately, there were no substantive changes to who can assert a privilege for performing work for the owner. There are different claims and different privileges for those who perform work directly with the owner and those who perform work for a contractor. There are no changes for those who perform work for the owner.  

Claims by Those Who Perform Work for A Contractor – 9:4802  

In addition, there were no substantive changes for those who perform work for a contractor. What is meant by the word substantive is about who can assert a legal claim. It does clarify in the new law that a contractor who pays a subcontractor’s employees is subrogated to the claims of those employees against their employer. However, the Act is clear that even if you as a contractor pay a subcontractor’s employees it cannot serve to save your lien rights because you cannot take a subcontractor’s lien rights under the Private Works Act.

Amounts Secured by Claims and Privileges – 9:4803  

With respect to what is secured by a claim and a privilege, the Act clarifies that your claims do not secure attorney’s fees. In Louisiana, you are entitled to attorney’s fees by statute or contract. If you have a contract that allows you to collect attorney’s fees. Unfortunately, that aspect of your claim is not preserved under the Private Works Act.  

All that your claim under the Private Works Act would be is for the balance that you are owed for the work that was performed, which is supported by a privilege.  

The Act also clarified that if you have consultants or sub-consultants that work within a juridical entity, in other words, there is an LLC or corporation, then those consultants and sub-consultants do not personally have the claim, it is only on behalf of the company.  

Notices Required of Certain Claimants – 9:4804  

Certain claimants under the Private Works Act have additional notice requirements. One of those is lessors of movables, which means if you lease equipment for a job site, the good news is that the changes relaxed prior onerous notice requirements on lessors of movables.  

Under the prior act or before the change, the lessor had to give notice signed by both the lessor and the lessee (the person to whom they lease the equipment) and had to give notice to the owner and the contractor within ten days after the movables were first placed on-site.  

Normally, people would use a copy of the agreement and if you did not give that notice within ten days, then you had no right to file a claim or you did not have a privilege in the lessor’s favor under the Act. Ten days as you can imagine is a pretty short timeframe, so no matter how long you are on the job – you could be on the job for a year or two (your equipment at least) - you would have no right.  

Fortunately, the state law was changed and now the lessor of movables had to still give notice and you have to give notice to the owner and contractor. You have to give it to the owner of the Notice of Contract is filed because that would give you information from the owner if they are not a party to the lease and the contractor unless they are a party to the lease.  

But if the notice is given later than 30 days then you do not lose your entire right to claim a privilege. All you lose is the rents that accrued prior to the notice but if you give the notice within the 30 days, then you have preserved your claim and your legal rights for all rentals.  

So give your notice within 30 days to preserve the entirety of your claim but the good news is if you fail, you can still give notice later. But it will only preserve your rights for rentals due after the notice is given.  

a. Contents of Notice of Movables  

The notice has to contain just the name and address of the lessor who is renting the equipment and a general description of the movables.  

The property owner or the contractor has the right to request that you provide a more specific example, listing, or description of the equipment that is being leased. And if you get a request then you have 15 days to provide that information. Interestingly – and this is a new law so it is unsure how it is going to be interpreted by the courts, what the statute says is that if you do not give a timely and accurate response to the request, then you lose your claim and privilege but only to the extent of any damages suffered by the person making a request as a result of the failure or inaccuracy.  

If you do respond within 15 days and give a full description of the equipment that is being leased, then you have preserved your legal rights and you do not have to worry about anything. It also bears to note that you do not have to respond to this request unless you have previously given notice and to preserve your claim. But hopefully you are going to give that notice because without it, you have no claim.  

b. Clarifies what happens if a seller of movables to a subcontractor does not provide Notice of Non-payment  

Now ‘seller of movables’ is basically people who supply material to a project. The law now clarifies that if a seller of movables does not provide required notice and they have an additional notice requirement, then the seller loses their claim against the owner, contractor, and privilege in the real property.

So as a material supplier, if you do not provide the required notice, you get nothing. You cannot reserve your claim for a certain amount. You have to give notice. Now the good news for the seller movables is that the notice is due no later than 75 days after the last day of the calendar month in which the supplies were delivered. In other words, you do not have to give notice ahead of time. You can supply the material and if you do not get paid, then within 75 days of the last day of the month that the material was supplied, you have to give notice.  

So every month that you have not been paid for material, you have to give notice for that month. There used to be cases that said you just had to give it at the end but there are cases now that disagree with that. Of course this is a new law, but it is suggested that any time you do not get paid within 75 days of the last day of the month that you delivered it, give notice of that unpaid amount.  

That notice has to include the name and address of the seller, the name and address of the subcontractor, a description of the material that was supplied and a statement of the unpaid balance, basically what is owed to the seller for the supplies.  

Work Defined  

Under the changes now, if you perform preliminary site work for the building contractor, you now have the same deadline to file a statement of claim as other people performing work on the building. It used to be a different time period but now it does not matter.  

Notice of Contract with General Contractor to Be Filed

A Notice of Contract is exactly what it sounds like, and it is supposed to be filed by the property owner or the contractor, and now the notice must contain a complete property description. This is the obligation of the owner, or the general contractor and other lower-tier contractors do not have this obligation.  

a. Notice of Contract must contain ‘complete property description

What is a complete property description? Well now there is a change in the law to say any description that is contained in a mortgage of the property would be sufficient for the mortgage to be effective. This means that you should not use just the street address. You have to have more than that. You have to have more of a legal property description that talks about sections. The best thing would be metes and bounds.  

b. Increased threshold requiring a Notice of Contract to be filed

But you can get that through an abstract or hopefully, it will be attached to the Notice of Contract which will be filed and then you will be able to use that in addition, it increased from $25,000 to $100,000 – the threshold that requires a Notice of Contract to be filed.  

Now what that means for projects that are worth over $100,000 is that a Notice of Contract has to be filed and if it is not filed under those conditions, there are some effects more drastically to the general contractor, but also to the subcontractor.  

c. Rejects general contractors who fail to comply with filing requirement to assert privilege for  

This is a very important change for general contractors. Under the old law, there were cases that held if a general contractor failed to comply with its filing requirements meaning that it failed to file a Notice of Contract.  

For the purposes of understanding this point, a general contractor must calmly file a Notice of Contract to preserve its ability to file a mechanic's lien. The failure of the general contractor or the owner does not affect the right of lower-tier subcontractors to file construction liens. But it does affect the timing.  

Under the old cases, if the general contractor did not file the Notice of Contract, they held the general contractor could nonetheless file a mechanic's lien as an ordinary contractor for work itself performed. Well now the law has changed that and has basically held that under at least the new law if the general contractor fails to file a timely Notice of Contract for projects that exceed $100,000, that general contractor has lost their lien rights.  

Bond Required: Terms and Conditions – 9:48:12  

Now, as for the construction bond, if the work is estimated to exceed $100,000, then a bond must be issued by a surety company licensed to do business in Louisiana and the bond must be equal to the price of the work. It used to be a tiered amount of how much the bond was to be required now. If a bond is not filed, then all that does is change the rights of the owner.  

If a bond is filed, the owner has certain rights to get claims against them dismissed and claims against their property, and they lose that right if a construction bond is not required. That is all that the failure of a bond does.  

Liability of Surety – 9:48:13

With Liability of Surety, you do not have to deliver a Statement of Claim or Statement of Privilege, or a copy of it to the surety 30 days before filing suit. That is no longer a requirement, but the new law does provide that you should not file suit within the lien filing period because then that would be premature. So wait until after the lien filing deadline and then file your suit to enforce yearly.  

Preservation of Claims and Privileges – 9:48:22 

Now to preserve your claim and privilege, the new law clarifies that you can file your statement of claim any time before the deadline.  

a. Can file statement any time before deadline

You do not have to wait for the commencement of the filing period. There are some cases out there, mostly for the Public Works Act, but there was concern by the BAR that they may be interpreted to apply to the Private Works Act.  

Now it does not matter under the new law. Any time before the filing deadline, after of course, your claim has matured, then you can follow your statement of claim. As to the filing deadline, if a Notice of Contract was filed, and a Notice of Termination or Notice of Substantial Completion is filed, then a contractor still has 30 days to file statement claims. That is not a long time, but you do have 30 days.  

So when your project is getting close to completion, you may want to start paying attention to those issues now.  

b. Reduces filing deadline for contractors and general contractors  

Now this is important, the law did change for one deadline, and it now provides that contractors have an outside deadline of six months if a Notice of Contract was filed, but no Notice of Termination or Notice of Substantial Completion is filed. Under the old law, a filing of a Notice of Termination or Substantial Completion was required to even begin the filing requirement.  

So now under the new law, if there is no Notice of Termination but there is a Notice of Contract, then you have a deadline of six months to file a lien. The general contractor has seven months if a Notice of Contract is filed, but no Notice of Termination.  

c. General contractor can force owner to file Notice of Termination if substantial completion or abandonment of work

But now, if you are a general contractor, you cannot force the owner to file a Notice of Termination. If the project is substantially complete or abandoned, and if the owner refuses, then you can go to court, obtain a judgment and file that.  

The effect that has reduces the amount of time that a subcontractor or lower-tier contractor has to file their Statement of Claims.  

d. Statement of Claim or Privilege shall identify the owner who is liable for the claim  

Now when the Statement of Claim is filed, it is supposed to identify the owner who is liable to the claim. Not all owners of the immovable property are liable, just those who contract it for the work. If the owner is not of record (it could be a lessee who does not have a recorded lease), cannot find that information, and you do not know who the actual owner is who requested to work, then you can list whoever is listed in the public records. That is sufficient.  

e. Can still request notice from owner of the substantial completion or abandonment of the work

You could still request the notice of the owner of substantial completion or abandonment of a work. In other words, you could say, “look owner, I want you to tell me when the work is complete, so I know when to file my Statement of claim.”  

You have to make this request before the filing of a Notice of Termination because that obviously triggers one of the events that triggers the start of the deadline to file your claim.  

f. If Notice of Substantial Completion or Abandonment is requested and not provided by owner  

Or you have to do it before the substantial completion or abandonment of the work. In fact, nothing that has been filed you still have to do if the project has been substantially complete. It is hard to tell that, but you need to do it earlier.  

Now if you request it from the owner, the owner does not give you this information, and you do not file your Statement of Claim timely, then your claim against the owner is not extinguished. You still have your claim against the owner. But you lose your privilege in the property and you still have to file suit within a year, which is a bit of a change.  

g. Privilege in favor of the person shall be extinguished by failure to file timely statement of claim or privilege  

Privilege is extinguished if you do not file the Statement of Claim. So you do have a claim against the owner, you do not have a claim against the property. In other words, your claim is not supported by the value of the property which may or may not be a problem depending on if the owner sells the property in the interim or if the owner has no assets other than that it could be a single project owner. This means that without a claim against the property, the claim against the owner really does not help.  

There is also a requirement that an unpaid seller of movables (somebody who provides material for residential work) deliver the nonpayment to the owner at least 10 days before. That is no longer in effect, and they used to have a seven-day period but that is also gone. So basically, they are under the same rules as everybody else.  

Filing; Place of Filing; Contents

For the place of filing, basically you have to follow where the immovable property is located. And now there is a little bit of a change.

Statement of Claim or Privilege identifying immovable by reference to Notice of Contract – 9:4831

The Statement of Claim or Privilege has to have a description of the immovable property and you can satisfy that by referring to the Notice of Contract. But if the Notice of Contract does not have a reasonable identification of the property, then the statement is not sufficient. So that is not valid for all purposes.  

However, it will preserve the claimant’s rights against the owner and the contractor, but you lose your privilege in the property and against third parties who subsequently purchase it. So it is better to put your own property description in the Statement of Claim rather than just referring to the Notice of Contract.  

Request to cancel inscription of claims & privileges; cancellation; notice of pendency of action  

If you name the wrong owner, in other words, you name the owner of record who did not request the work they can have the claims against them dismissed, that is fine. Because it does not affect your right against the true owner who is required to pay the claim.  

Another important point, though that has changed, is that it now clarifies that the recorder mortgages or the clerk of court is required to cancel the inscription. Basically, your Statement of Claim and your privilege if you fail to file a timely Notice of Pendency of Action or Notice of Lis Pendens you have to file suit within a year after filing your Statement of Claim.  

If you do not also file a notice of that suit in the mortgage records then you lose your privilege and under the new law, then your statement is cancelled. Per se, they do not require anything further than the lack of that. If the owner can say you filed suit, but didn’t file the Notice of Lis Pendens, you have lost your privilege in the property. They can now sell that property out from underneath you.  

Delivery by Electronic Means – 9:4845  

You can now deliver notice by electronic means by email. If the person consents to that method of deliveries, you should try to get that in your contract. And you can argue over time if they have accepted notices that way because email is certainly much easier than by mail, certified mail, or registered mail.  

You do need electronic confirmation of receipt. But if you get that, then it will be considered served and it is provided.  

Residential Improvement Notice – 9:4852  

For those who provide work residential property, there is a Notice to Owner that is required. That has also changed. There is an example of it in the statute of what you need to provide.

Effective Dates  

Generally, the law with the new deadlines and all the changes are effective January 1, 2020. It will apply to work that begins on or after that date, unless there was a Notice of Contract filed before January 1, 2020.  

a. If no Notice of Termination is filed before January 1, 2020  

Now if a Notice of Termination was filed before January 1, 2020, then the filing has not changed. In other words, if a Notice of Contract is filed and a Notice of Termination was filed before January 2020, then you are under the current statute. You are not under any of the changes if no Notice of Termination was filed before January 1, 2020.  

Now if no Notice of Termination was filed before January 1, 2020, and the work is substantially completely or abandoned after that date, then the new deadlines apply even though the work started before January 1, 2020.  

b. Amendments to 9:4821 which addresses rankings of privilege apply retroactively to all works

The amendments which address the rankings of their privilege, apply retroactively to all works, and issues that were discussed above, like cancelling inscriptions of claims, and the Notice of Lis Pendens that also applies retroactively.  

Easy Way to Protect Your Rights with SunRay  

Customers of SunRay and new customers can use the online portal and all the forms required. They are online and easy to select in the SunRay online system. So you can go online if it is residential or commercial.

a. Request lien rights in 60 seconds

There are different statutory forms for those, and they are on the online system so you do not have to worry about that. All it takes is approximately 60 seconds to enter in a request. Your job address, who you have a contract with, if you have a contract with the subcontractor, the general contractor, if you have this information in front of you, all it takes is 60 seconds to secure your lien rights.  

b. Easily set up reminders for your projects  

This is one of the most important parts of your lien and bond claim rights – reminders. So the SunRay application assists you by sending you email reminders. These are also saved in your Outlook or Google account.  

c. All waivers can be requested and managed online for free 

You can do all of your waiver and release of liens in the SunRay system for free and manage everything online for free. So if you give out ten partials, it is all stored online so that you can see what you give to your subcontractors, the general contractor, or even the owner of the property.