Zlien operates out of New Orleans, LA, and so we’re all very excited about the Mardi Gras season. While Mardi Gras officially started on Kings Day (January 6th – Yes, we had our kings cake), the real active part of Mardi Gras is just now apporaching, with some of the first parade dates nearing.

In the spirit of the season, we’re going to address a scenario where folks may wonder about their mechanics lien rights. While this post talks about a very specific type of work that really only occurs in New Orleans, the lesson applies nationwide.  And that’s a lesson we’ve stated over and over again on this blog:  to qualify for mechanic lien rights, incorporation into the improvement is key.

Mardi Gras stands are simply temporary structures where people can stand or sit to watch parades. Local construction companies contract with the city or private entities to build these stands on public or private property.  I found a photograph online of some Mardi Gars stands at the famous Gallier Hall, which will give you a good idea of what these things look like.

Mardi Gras stands constructed in front of Gallier Hall. This is what these Mardi Gras stands look like all over the city of New Orleans, which are constructed and left complete for approximately 1 month a year across the city.

Companies construct these stands to provide temporary value to the property (property owner’s can charge companies big money to use these stands), and they are a “construction project” … but do they qualify for mechanic lien rights?

In most states, the answer will be a resounding no.

The reason this construction does not qualify for lien rights is that they are not permanently attached to the property, and they do not permanently improve the property. Without permanent attachment, there’s no lien rights. That’s that.

Now here comes the surprise.

While the law is crystal clear in most states that this would not be lienable services, in Louisiana, the law isn’t so clear. In fact, after reviewing the law in light of this question, I’d be willing to state that this work very well may qualify for a mechanic’s lien.

The right to file the mechanic’s lien would arise out of the Louisiana Private Works Act.  When describing who has the right to file a lien, the law provides as follows:

The following persons have a privilege on an immovable to secure the following obligations of the owner arising out of a work on the immovable:

(1) Contractors, for the price of their work.

(2) Laborers or employees of the owner, for the price of work performed at the site of the immovable.

(3) Sellers, for the price of movables sold to the owner that become component parts of the immovable, or are consumed at the site of the immovable, or are consumed in machinery or equipment used at the site of the immovable.

What’s interesting about this is that the requirement for the work to be “consumed” at the site or to become “component parts of the improvement” are limited only to those who sell movables (i.e. material suppliers).  But, what about laborers, contractors and subcontractors?  These folks are entitled to the price of their work without any such qualification.

An additional step is required to see if Mardi Gras stand construction qualifies for a lien, as the Louisiana statute only allows a lien filing if the obligations “arise [sic] out of a work.”  The term “work” is a definable term, defined in the Private Works Act’s §9:4808 as follows:

A work is a single continuous project for the improvement, construction, erection, reconstruction, modification, repair, demolition, or other physical change of an immovable or its component parts.

Whoa!  Look at that.  It’s a pretty broad definition.  It includes any project for the construction, modification, repair…”other physical change” of an immovable or its component parts.

Now, practically speaking, I think a Louisiana judge would look at a mechanic’s lien for Mardi Gras stand construction very strictly, and perhaps interpret the Private Works Statutes in a way that does not classify these stands as a “physical change” to the immovable or component parts.  However, it would make for a very colorful argument, and I’m not convinced the law in Louisiana is clear on either side.

Long Answer:  It’s extremely common for folks to not quite understand the differences between preliminary notices and notices of intent to lien; and further, to not quite understand when a state requires notices of intent to be sent.

Generally speaking, the states that require a “Notice of Intent to Lien” are in the minority. We wrote a blog post listing out the states that require notices and when these notices must be filed.  While every state is a little different, the “Notice of Intent to Lien” states typically require the lien claimant to notify the property owner 10-30 days before moving forward to file the lien.

However, the majority of states do not have any such requirement, and those unpaid on a construction project can proceed to file their lien without ever sending a “notice of intent” or warning anyone immediately before filing.  You can check out a summary of the 50-State Mechanic Lien Laws at Zlien.com/Lien-Law/ to get details about the requirements in your state.  Also, if you want to order a mechanics lien or notice of intent, you can do so on the LienWizard.

It’s been a while since I posted about the lien laws in my home state of Louisiana. Plus, I’ve recently been contacted by a number of material suppliers who are either based in Louisiana or who do business in the state, and they are confused about the state’s notice requirements.  There’s good reason for the confusion, as this post will explain.  In short, while Louisiana is typically a non-notice state, there are circumstances when material suppliers must deliver notices to protect their lien rights.

Supplier Notice Requirements On Louisiana Private Projects

The notice required for material suppliers in Louisiana is referred called a “Notice of Non-Payment” (Download PDF Form Free). This notice is unique because it can act like both a preliminary notice and/or a notice of intent to lien.  While there are usually clear differences between preliminary notices and notices of intent to lien, this Louisiana notice tows the line between these two notice types.

Whether this notice must be sent, and when it must be sent, depends on your project.

If you’re working on a residential project in Louisiana, the Notice of NonPayment must be sent to the property owner at least 10 days before filing a mechanic’s lien.

If you’re working on a project where the contract was recorded, the Notice of NonPayment must be sent to the general contractors and the owner within 75 days from the last day of the month in which that material was first delivered.  The trick here is knowing when a contract was recorded, as general contractors and owners are supposed to record their contract on every project, but frequently overlook the requirement. Researching whether this was recorded is work, and so it’s safest, cheapest and easiest to just treat every project as one where the contract has been recorded.

The Notice of NonPayment must be served to the required parties by registered or certified mail, with return receipt requested.  The notice must contain the following information:

• Name and Address of the Material Supplier
• General Description of Materials Supplied
• Description Sufficient to Identify the property against which a lien may be claimed (Legal Description Recommended)
• Written Statement of the Supplier’s lien rights for the total amount owed, plus interest and recordation fees
• Identification of total amount owed

Supplier Notice Requirements on Louisiana State Projects

Determining when notice is required for material suppliers is a bit less complex on Louisiana state projects, and that’s because there are no “if’s” to the requirement; material suppliers must always deliver a notice of nonpayment to preserve their lien rights on Louisiana State Projects.

If working on a public / state project in Louisiana, material suppliers must deliver a Notice of NonPayment to the general contractor and the public entity commissioning the work within 75 days from the last day of the month in which the material was first delivered.

Like the Notice of NonPayment for private projects, it must be delivered by registered or certified mail, with return receipt requested, and contain the following information:

• Name and Address of the Material Supplier
• General Description of Materials Supplied
• Description Sufficient to Identify the property against which a lien may be claimed (Legal Description Recommended)
• Written Statement of the Supplier’s lien rights for the total amount owed, plus interest and recordation fees
• Identification of total amount owed

Filing Your Lien on Louisiana Private and State Projects

While Material Suppliers have special notice requirements in Louisiana, they file their mechanics lien or state bond claims just like everyone else. Rather than regurgitate Louisiana’s mechanic lien filing requirements, I’ll point you to some great resources previously published on this topic.

• How to File a Lien in Louisiana (Avvo Guide)
• File A Lien For $295 with Zlien 

Some important things to remember about Louisiana mechanic lien claims are:

• Get A Legal Description. In Louisiana, it’s critical that you describe the property properly.  While there are some ways to do this without a true legal description, it takes more than a simple municipal address to make this work.  Legal descriptions are the safest bet.
• Describe Your Work.  Don’t just say you did “work” or “labor” or “supplied materials.”  Dig in and get specific.
• You must file state liens in Louisiana. In most states, public liens are only sent via certified mail.  They must be filed in Louisiana.

I practice law in Louisiana, and I had another equipment rental company call my offices last week to discuss their options in collecting a debt for some leased equipment.  Whenever I’m contacted to help collect a debt, I immediately discuss the potential client’s lien rights.  Bar none, filing a mechanic’s lien is the absolute best first-step to collect a debt.

This particular potential client had leased equipment, the equipment was used on a construction project, and this company was within the statutory lien period.  Everything was in line for them to file a mechanic’s lien…except for one little, but massively important thing:  they didn’t send a Notice of Lease.

“A notice of what?” they asked.  And rightly so.

Typically, Louisiana a non-notice state, meaning that folks can file mechanics liens without delivering any preliminary notices.  There are two small exceptions:  (1) Prime contractors must file a Notice of Contract when starting work; and (2) Equipment rental companies must deliver a Notice of Lease within 10 days of renting equipment or machinery.

To put it lightly, these two exceptions aren’t well known in Louisiana.

In fact, this particular client had leased heavy construction machinery for about twenty years, and had never heard of the requirement. The requirement, however, is certainly there, nestled within La. R.S. 9:4802(G)(1), mandating as follows:

G.(1)  For the privilege under this Section to arise, the lessor of the movables shall deliver a copy of the lease to the owner and to the contractor not more than ten days after the movables are first placed at the site of the immovable for use in a work.

We wrote about this “Notice of Lease” requirement on this blog before, and you can take a look at the Notice of Lease tag.

Since the Notice of Lease must contain certain information, the best practice is to simply sent the written lease itself to the receiving party.  According to the statute, the lease must be delivered “to the owner and to the contractor,” but another best practice is to send the notice along to any and everyone up your contracting chain.  The lease must be sent along to the required parties by certified or registered mail.

The notice must be sent within 10 days of when the equipment or machinery is first placed at the jobsite.  If it’s a day too late, or if it’s not sent properly or to the correct parties, it could spell game over for your lien rights.  In other words, don’t overlook or underestimate this requirement!

Long Answer: The first thing to say about this subject is that if you’re doing work that requires a license without having that license, you’re treading in dangerous water regardless of your state’s laws.  While some state are more liberal and allow unlicensed parties to collect amounts owed to them, it is very rare when the unlicensed contractor isn’t penalized in some way. Therefore, if you’re unlicensed and doing construction work that requires a license….get licensed!  You can read more about Contractor Licensing laws on my other blog, Construction Law Monitor.

The question here is whether you can file a mechanics lien if you’re unlicensed.  Unfortunately for unlicensed contractors, this question may be just the tip of the iceberg.  In reality, unlicensed construction participants must ask a more significant question: can they recover for their work at all?

I’ll discuss the laws in California and Washington, and then in Louisiana, to compare how the answer to this question may vary by state.

In California and Washington, the laws against unlicensed contractors are very strict — unlicensed contractors have no recovery whatsoever.  This means they cannot file a lien, or a lawsuit, or anything at all.  If they did $1,000,000 of work, and a party refuses to pay them, they are completely without a remedy and basically donated their time and money to the construction project.  (See previously written post: Can Unlicensed Contractors Lien in California?)

Is this fair?

There are two schools of thought on this.  In Washington and California, the legislature considers it more important to regulate the unlicensed constructor market than it is to ensure unlicensed contractors get paid.   States like Louisiana take a different approach.  In Louisiana, the unlicensed contractor is still penalized (i.e. he can get penalized by the licensing board, and his contract is declared null and void and the unlicensed contractor can only recover the “minimum value” of his work), but he is still allowed to recover some sort of compensation for the work he performed…and that means, he can file a mechanic’s lien.

If you’re doing work in California or Washington and are unlicensed, you’re really out of luck.  If you’re in Louisiana, you have some legal ground.  Elsewhere, it’s really important to examine that state’s liens laws to determine if you can file or recovery for your work.

While the question seems quite simple, it’s actually a bit complicated.   And it’s a very sensitive question to boot.   The answer differs depending on which state’s law applies, and some states are more sensitive to the topic than others.   In some states, if the lien amount is listed incorrectly, or includes costs not allowed under law, it could invalidate the entire lien.

In other words, tread very carefully.

So, what is this question asking anyway?   Well, folks are typically looking to include two different costs into the amount of its lien.   First, the cost of filing the lien itself.  This may be the cost of an attorney, the filing fees with the county, or the cost of our service ($295).   Second is charged interest on the unpaid account.  Sometimes this is the state’s judicial interest, or interest allowed by contract.

Let me make something very clear:  This is an extraordinarily complicated question to answer on a general basis.  You should consult with an attorney to figure out exactly what costs you can and should and may include in your lien.

However, let me take a crack at trying to answer this question generally.

In Louisiana, Washington and Oregon, if someone wants a general rule, I always advise my clients to simply file the lien for the amount that is due under the contract, without any of the extras.  I advise this unless there is specific circumstances and law that allow them to do the contrary, and they know the law.  I advise this simply in an abundance of caution for these two reasons:

1) If you include it (the extra costs), and you cannot include it, it could invalidate the lien; and

2) if you do not include, it doesn’t mean you can’t collect it. It just means its not part of your lien, and you don’t have the lien against those particular funds (you still have any legal or contractual right to it).

Although it may be recommended to send a demand letter, it is not a requirement under Louisiana law to establish a commercial debt action (it is in some states). It’s logical, however, that if the debtor may pay within 10 – 30 days of demand, there is little benefit to spending the time and money on initiating a lawsuit.

This post provides a few sample demand letter templates.

In reviewing these templates, it’s important to remember that different situations call for different measures, and specifically that one demand letter may apply more correctly than another.

Furthermore, in certain circumstances (when a check is returned NSF, when an account is an open account, etc.), there are statutory requirements for sending a demand letter in order to qualify for statutory penalties.

The counsel of a qualified attorney is recommended when taking a past-due account to the next level, however, there is some benefit ($$) to sending a demand letter in-house before handing off the reigns to your attorney.

Once you hire an attorney, he or she will likely begin the representation with a new demand letter, but your original letter will not be in vein. The in-house demand letter, when prepared and sent correctly, may qualify you for collection of interests and penalties from the time of its sending, and as mentioned above, may even result in payment. The attorney letter will ensure that the statutory requirements are met, and they are generally more threatening than in-house letters.

Finally, regardless of the correspondence you are prone to send, there are some essential considerations you should have when sending a demand letter.

Be sure to enclose information about the debt with your letter, which may include invoices, estimates, contracts, photographs, etc.

This not only gives creditability to the recipient of your demand letter, showing you are able to prove your debt, but it gives the recipient less of an excuse for non-payment. While not bulletproof, if the matter goes to court and you have a well-written demand letter with documentation proving the debt, you’ll have a better position to argue that the debtor was wrong for not making payment.

From a practical standpoint, there are other things you want to keep in mind. Most importantly, sending a demand letter is of little use unless you can prove it was sent and received.

Send the letter Certified Mail with Return Receipt Requested, and keep track of the Certified Mail Number. Follow-up to ensure the letter is delivered, and if needed, even make an effort to have the letter hand delivered by courier (who should sign an affidavit of delivery).

Not only should you keep proof of the sending of the document, but you want a good and reliable copy of what was sent. If you have a letter and enclosures, mention the enclosures within the letter so you can prove that they were in fact enclosed. Scan a copy of all the documents together with the certified mail number, bates stamp the documents or put page numbers at the bottom of each page (1 of 6, 2 of 6, etc.).

General Collection Letter Template

Contractors seeking to collect amounts owed to it from a property owner should send a basic collections letter. Here is a basic collections letter in Microsoft Word format.

Demand letter on An Open Account Template

If you have an “open account” with the debtor, you will want to send a demand letter substantially similar to the template below. Open Accounts are provided special treatment under Louisiana law, with the benefit to creditors being that they are able to collect interest and attorneys fees as a matter of law.

The critical questions when collecting an open account are: (1) Is the debt an open account?; and (2) Has the creditor taken the correct steps to collect on it, preserving its rights to obtain attorneys fees and interest?

In general, contractors are infrequently able to capitalize on the open account laws in Louisiana, which are more ordinarily preserved to other professions and types of accounts. However, construction material suppliers are frequently able to use the open account laws, and there is clearly some grey area on the issue pursuant to recent Louisiana Supreme Court decisions.

Regarding the second question, the Louisiana Open Account law requires that you send a demand letter before qualifying to collect attorneys’ fees and interest. The demand letter must give the debtor information regarding the debt (invoices, contracts, estimates, photographs, etc.), and it must provide them with a certain amount of time to make payment on the account (30 days).

A demand letter in substantially similar form to the form provided by this post should suffice to start the clock for your company under Open Account laws. Be sure, however, to enclose evidence of the debt with the letter, and to keep documentation to prove that it was sent and to prove exactly what was sent.

Demand on Open Account in Microsoft Word format.

Demand letter on NSF / Dishonored Check

The penalties for writing an NSF check can be severe. If your company seeks re-payment of the NSF check in accordance with Louisiana statutes, it will be positioned to take advantage of these penalties, applying great pressure to the party who wrote the NSF check to make payment.

The following is a sample template letter that may be sent after receipt of a NSF check.

Demand on NSF Check in Microsoft Word format.

Demand Letter Against Contractor Who Misapplied Funds

When a contractor misapplies funds as above discussed, you may send this template letter to put that contractor on notice of its default and to demand payment under the statute.

Demand Against Contractor Who Misapplied Funds in Microsoft Word format.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Construction Law Blog.

This begs the very important questions – what is a construction improvement project?    And beyond that, what is a construction improvement?

With respect to Virginia’s law on the issue, the Virginia Real Estate, Land Use and Construction Law Blog just posted on this topic:   The Line Between Furniture and Fixtures:  What Constitutes An Improvement, Part II. The post quotes a recent federal civil case, Summit Community Bank v. Blue Ridge Shawdows Hotel & Conference Center, LLC, whereby the judge distinguished between installed cabinets (which can be liened) and furniture delivered to the project (which cannot be liened) saying:

It is not sufficient for materials to simply add value to a building by their mere presence without any further connection to the building.

The law in Washington and Oregon is very similar to Virginia.  In both of these states, claimants may lien for work they perform in the “improvement of real property” or work used “in the construction of any improvement.”

Louisiana’s lien law is a bit more unique in this regard, and perhaps the most unique in the nation.   In Louisiana, claimants may file a lien whenever they perform services in connection with a “Work.”    A “Work” is defined as follows by the statute (LA RS 9:4808):

A work is a single continuous project for the improvement, construction, erection, reconstruction, modification, repair, demolition, or other physical change of an immovable or its component parts.

I once represented a claimant in a Louisiana action against it to remove a mechanics lien, whereby I submitted a memorandum to the court distinguishing “work” (little w” from “Work” required by the statute (big w).   I quoted the 1985 Louisiana Fourth Circuit case Lake Forest, Inc. v. Crilot Co., et al (466 So.2d 61) wherein a subcontractor’s lien against a property for excavation work related to the operation of a sand pit was challenged.

Interesting about this case is that there was no building or “improvement,” but the lien was found valid because the work was considered a “Work,” with the court explaining as follows:

Although “improvement” language is used in this general statement, La. R.S. 9:4808 contains a broader wording.  The definition of “work” as “a single continuous project for the improvement…or other physical change of an immovable…” appears to apply to this unique sand pit operation.

We conclude that this sand pit…was designed to improve Lake Forest’s property.  At the very least the operation was for the “modification…or other physical change of an immovable.”

Summary

Here is a short summary of this post.   It’s important to know what is and what is not an “improvement” to determine whether you can in fact file a construction lien for the work or materials you provided.   It’s also important to answer that question within the context of the laws applicable to your project.   Most of the stuff is black & white…but in some cases, there can be a little gray.

How to File a Construction Lien in Oregon

How to File a Construction Lien in Louisiana

These two legal guides offer plain english explanations on how to prepare and file a construction lien in either of these states.    After reading the guide, you can visit Zlien’s free Lien Punchlist & Forms center, where you can download more information about on the subject, and even download free PDF-fillable lien forms.

Want to dot your i’s and cross your t’s, and rest easy knowing your document will get filed?   Consider using the Zlien service to prepare your lien, file and serve it, and then store it online for your records.

The two above-listed legal guides were written and published by Scott Wolfe Jr., who is the founder of Zlien and the company’s President.   Separate from Zlien, Scott is a practicing construction attorney in Washington, Oregon and Louisiana, with his construction practice the Wolfe Law Group.

He previously published a similar legal article on Avvo.com about filing construction liens in Washington, which you can read here.

Today Betsey Rue, and her best friend Sam (office neighbor Wolfe Law Group’s 3 year old Bichon Frise) were featured on WomansDay.com as the Cutest Pets of the Day. Check it out.

We invite our employees to bring their own pets to the office. Betsey Rue and Sam are supervised in the New Orleans office by Oscar (the 3 year old French Bulldog of WLG founder Scott Wolfe).