The New Mexico legislature has passed modifications to the New Mexico Mechanics’ and Materialmen’s Lien Law.  The amendments were proposed by several industry associations working together with the goal to clarify issues that had been troubling in application of the statute.  These amendments have an effective date of July 1, 2007.

Many of the changes only clarify the language of the statute, but several are substantive.

1.  As an alternative to commencing an action in the District Court before the end of two years, the 2007 amendments allow the action to be commenced in a binding arbitration.

2. The right to petition the Court to remove a lien from real property to other security may now be brought by an original contractor as well as an owner.  There must be separate security for each lien that has been removed. 

3.  A contingent payment clause, “pay if paid,” shall not be construed as a waiver of the right to file and enforce a mechanics’ or materialmen’s lien.

4.  The statutory requirement that the contractor had a duty to defend any suits by its subcontractors or suppliers has been deleted.

Following the 2007 legislative session, the State of Florida enacted two bills that made significant changes to Florida's construction lien and construction bonding statutes.   The following is a summary of the changes and additions to the lien law law statues.

I. CONSTRUCTION LIEN STATUTE

    A.  SENATE BILL 2768/HOUSE BILL 1285:  This bill, referred to as the 2007 construction lien law glitch bill, amended several existing construction lien statutes contained in  Chapter 713, Florida Statutes.  The effective date of the statutory changes is July 1, 2007.

             1.  Section 713.01, Florida Statues, provides the definitions of the terms used in the lien law.  This section has been amended as follows:

                    a)  The statute now defines "final furnishing" as the last date that the lienor furnishes labor, services, or materials and does not include correction of deficiencies in the lienor's previously performed work or materials supplied.  The revised statute now specifies that the date of final furnishing may not be measured by other standards, such as the issuance of a certificate of occupancy or the issuance of a certificate of final completion.  With respect to rental equipment, the revised statute specifies that the term "final furnishing" means the date that the rental equipment was last on the job site and available for use. 

                    b) Amends the definition of "furnish materials" to include the delivery of rental equipment to the site of improvement as prima facie evidence of the period of the actual use of the rental equipment from the delivery through the time the equipment is last available for use at the site, or 2 business days after the lessor of the rental equipment receives a written notice from the owner or the lessee of the rental equipment to pick up the equipment, whichever occurs first.

            2.  Section 713.012 is a new statute.  It was added to clarify that all lien notices, demands, or requests permitted or required under Chapter 713 must be in writing.

             3.  Section 713.015 is a consumer protection statute that must be complied with for all single and multi-family projects not exceeding 4 units.  This statute has been amended to clarify that the mandatory warning notice for direct contracts between an owner and contractor now applies to direct contracts exceeding $2,500.00.  There are minor changes to the form of the mandatory warning notice.  If a contract is written, the notice must be in the contract documents.  For written contracts, the notice must be provided in a document referencing the contract.  Finally, the failure to provide the written notice does not bar the enforcement of a lien against a person who has not been adversely affected.

            4.  Section 713.07 was amended to provide for the recommencement of construction following the termination of the direct contract.

            5.  Section 713.08 was amended to state that claims of lien may be prepared by the lienor or the lienor's employee or attorney.  There were also revisions to the 90 day limitation for recording a lien where the original contract is terminated.

            6.  Section 713.13 was amended as follows:

                    a)  The notice of commencement must include the tax folio number.

                    b)  A new warning that must be included on the notice of commencement form regarding improper payments under the lien law.  Also provides that the notice of commencement must be recorded and posted on the job site.

                    c)  Requiring the notice of commencement to be notarized verified and acknowledged.

                    d)  Subsections 713.13(5)(a) and 5(b) was created to clarify when a notice of commencement may be amended.  In order to change contractors, a new notice of commencement or notice of recommencement must be executed and recorded.  The amended notice must also identify the original notice of commencement by book and page number, and must be served on the contractor and all lienors who serve notice before or within 30 days after the amended notice is recorded.

            7. Section 713.135 was amended to require that building permits contain a warning regarding the recording of a notice of commencement.

            8.  Section 713.16 was amended to emphasize that statements of account must be under oath.

            9.  Section 713.18 was amended to provide procedures for service of notices upon a limited liability company.

           10.  Section 713.22 was amended to extend the duration of liens when an amended claim of lien showing a later date of final furnishing is filed.

           11.  Section 713.31 was amended to provide for the award of attorney's fees and costs in fraudulent lien actions.

In mid 2005, the Georgia Court of Appeals handed down a decision that, at first glance, did not cause much concern in the lien law circles; however, lately some questions have arisen from subscribers that warrant discussion.

The case involved a lien claim by an equipment supplier (Supplier) who supplied equipment used to connect a sewer main in a public right-of-way to a newly-established sewer system of a private residential subdivision. The Supplier liened the private subdivision for the rental value of the equipment supplied to make the sewer line connection in the public right-of-way.

The Court ruled that off-site work may not be considered an "improvement to the property" such as to qualify under the Georgia lien statute. In order for labor, material or equipment supplied to qualify as an "improvement" to private property (so as to qualify for lien rights), the supplied materials, equipment or services must go into, and become part of, the private property improvement. The fact that the work in the public right-of-way was necessary in order to complete the improvement on the private property did not overcome this strict reading by the Court of Appeals of the Georgia lien statute.

Please be aware of this strict intrepretation as you evaluate future contract risks.

Effective September 15, 2005, the Maine mechanic's lien statutes are amended to require all contractors, subcontractors, and suppliers to file a Notice of Lien in the registry of deeds for the county in which the real estate is located within 90 days of the date of last labor, services or materials supplied to the project. The owner must be sent a copy of the Notice of Lien by "ordinary mail." A post office receipt of mailing is deeded conclusive proof of receipt by the Owner.

Further, a certificate from the clerk of court in which the action is pending should be filed in the registry of deeds within 60 days of the date on which the lien complaint was filed. An attested copy of the lien complaint or an affidavit from the claimant or claimant's attorney can be substituted for the clerk's certificate.

The Notice of Lien filing is required of all claimants, including those with a direct contract with the Owner.

The Maine chapter will be updated prior to the effective date of September 15, 2005. Please review the chapter for a comprehensive discussion of all the changes before the effective date.

For Texas construction projects prior to 2005, when an owner terminated a contractor or when an original contractor abandoned a project, subcontractors needed to act quickly to preserve their lien rights. Subcontractors needed to send notices of unpaid amounts and file lien affidavits within 30 days of the termination or abandonment.

If they did so they might share in a portion of the owner’s statutory 10% retainage. If they failed to do so, they may have no lien rights at all (unless they had previously sent a notice of indebtedness and trapped money in the owner’s possession). A few weeks ago the Govenor of Texas signed a bill passed by the Texas Legislature to provide assistance for subcontractors and suppliers. The bill added a new section 53.107 to the Property Code to address situations where work is stopped due to termination or abandonment.

As a result of the change to the statute, if a subcontractor advises an owner that it wishes to be notified of a termination or abandonment, the owner must provide statutory notice of either occurrence. If an owner fails to provide this notice after a request, the deadline for a subcontractor to file a lien against the statutory 10% retainage is not limited to 30 days after termination or abandonment. This new section applies to projects wherein the prime contract is signed after September 1, 2005.

Changes to the Texas chapter will be updated very soon to reflect this change and a new form, Request for Notice of Termination or Abandonment, will be added.

In 2005, the Utah legislature made significant changes to provisions of the Utah lien law, the most notable of which was creation of the centralized State Construction Registry for the filing of Notices of Commencement, Preliminary Notices, and Notices of Completion.

A notice of commencement must be filed within 15 days of the building permit issuance for all projects. The notice of commencement should be automatically filed by the local authority issuing the permit. However, the original contractor should check and verify on the State Construction Registry that the local authority has filed the notice of commencement. For projects where no building permit is issued, the original contractor must file a notice of commencement with the State Construction Registry within 15 days of beginning physical construction work. If a notice of commencement is not timely filed, the subcontractor/supplier preliminary notice provisions and requirements set forth below do not apply.

For subcontractors and suppliers, a preliminary notice must be filed with the State Construction Registry before a notice of mechanic’s lien may be recorded. Subcontractors and suppliers of all tiers must file a preliminary notice within 20 days of its first furnishing labor, equipment, or material to a project or within 20 days of the filing of the notice of commencement, whichever is later. Preliminary notices filed after this timeframe only become effective 5 days after which they are filed and preclude a subcontractor or supplier from filing a claim for compensation for labor, equipment, or materials furnished prior to the effective date of the preliminary notice, except as against the person with whom the subcontractor or supplier contracted. After November 1, 2005, the Utah preliminary notice requirements no longer exempt residential construction. Therefore, even subcontractors and suppliers on residential projects must comply with the statute to preserve their mechanic’s lien filing rights.

Upon final completion of a project, an owner, lender, or surety related to the project may file a notice of completion with the State Construction Registry. “Final completion” means (1) issuance of a permanent certificate of occupancy, if required; (2) the date of final inspection by the local government entity, if a permanent certificate of occupancy is not required; or (3) if neither a permanent certificate of occupancy nor final inspection are required, the date on which there remains no substantial work to be completed to finish work on the original contract. However, final completion “does not occur if work remains to be completed for which the owner is holding payment to ensure completions of that work.” Upon the filing of the notice of completion, the timeframes for filing preliminary notices change so that all preliminary notices shall be filed within ten days of the date on which the notice of completion is filed.

Other changes affect the posting of alternate security for the automatic release of a mechanic’s lien. Now, the owner, original contractor, or a subcontractor can post a surety or cash bond for a variable percentage—between 150% and 200%, depending on the amount claimed in the lien—of the principal amount of the lien claim. Finally, advance written notice is no longer required prior to filing a notice of mechanic’s lien. These changes effect construction projects commenced on or after May 1, 2005 (with the exception of preliminary notices required on residential projects commenced on or after November 1, 2005).

In a very interesting decision that might have serious ramifications regarding the lien law, a Superior Court in Rhode Island ruled in the case of Desimone Electric, Inc. v. CMG, Inc., No. C.A. PM 01-6077 that the Rhode Island Lien Law was UNCONSTITUTIONAL!

The Rhode Island Supreme Court is expected to make a decision within the month on this important matter and a follow-up e-lert will be sent with the results.