Lessors Beware: Notifying the Owner of Your Lease
You are in the business of leasing heavy equipment to contractors. You are beginning to provide more and more machinery to jobsites. You just hit your first snag with payment. What do you do?
Chances are you are stuck in rough spot and have to defer to your contract for remedy. There is likely no answer for you under the lien law – unless you filed a notice of lease agreement with the owner within the appropriate time frame.
Lessors often do not learn about the dreaded notice provision until after they have been bitten by a bad customer. Both the Private Works Act and the Public Works Act each require that the Lessor of equipment to a construction project provide advance notice to the owner of the equipment’s use and existence at the jobsite.
Luckily, satisfaction of this requirement is quite simple. Under both Acts, a Lessor of movables (equipment, vehicles, etc.) must “deliver a copy of the lease to the owner not more than ten days after the movables are first placed at the site of the immovable for use in the work.” La. R.S. 38:2242(c). If the job is private and not public, you must also provide a copy of the lease to the contractor. La. R.S. 9:4802(G)(1).
The official comment for subsection G of La. R.S. 9:4802 states that the purpose of this law is to give notice to the owner and the contractor that equipment being used by a contractor is leased and thus potentially creating liability under the Private Works Act.
Though the type of delivery is not specified, it is commonplace to use hand delivery or certified mail. If hand delivery is utilized, it is important that the courier fill out a simple affidavit specifying what was delivered, when it was delivered, who it was delivered to, and where it was delivered.
Finally, the Notice of Lease Agreement does not have to be in any specific form – simply a copy of the contract should suffice. We do prefer that you use a cover sheet to inform the owner and contractor of the purpose of the delivery, reserving your rights under either La. R.S. 9:4802 (Private Works) or La. R.S. 38:2242 (Public Works).
Is Notice Required Before Filing a Construction Lien? Louisiana Law
It’s difficult to stress how beneficial filing a lien can be for your company when attempting to collect on a non-paying project. However, this begs the very important, and sometimes difficult to answer question: Are you legally entitled to lien?
In Louisiana, the lien statutes are drafted with a certain balance. On the one hand, the statutes were created to grant those involved with the construction of a project a privilege on the properties they build or improve. On the other hand, however, the statutes have mechanisms within to protect the property owners from being liened improperly, or otherwise without notice.
Unfortunately, the notice requirements are oftentimes confusing and technical. It is important, however, that your organization understand the notice requirements of the Private Works Act.
Contracting with the Owner / Resident
The type of notice required is called the “Notice of Lien Rights.” A copy of an example of this notice is available by clicking here.
This notice, again, is required when the following elements are present:
1) Work is being done on a residence;
2) You contracted directly with the owner of the residence. In other words, you are not subcontractor on the project;
3) The owner lives in the residence.
The Notice of Lien Rights to be sent to owners in residential projects is very important, because the law requires that it be provided before work begins, and not as a condition to your construction contract.
Lessor of Equipment or Other Movables
For example, if you lease equipment to a subcontractor, you are not required to deliver an additional copy of the lease to the subcontractor within 10 days of delivery because they will – presumably – already have a copy of the lease. However, you would be required to send a copy of the lease to the general contractor and the owner.
This puts those other parties on notice that you have leased equipment/movables to someone for the work at the jobsite, and if such notice is sent, you will have preserved your right to file a lien in the case of non-payment.
Seller of Movables / Materials / Equipment / Etc.
If the materials sold are incorporated into a commercial project, there are no notice requirements.
If the materials sold are incorporated into a residential project, and you would be liening a residence, LA RS 9:4802(G)(2)-(3) requires that you deliver a notice of nonpayment to the owner of the property at least ten (10) days before filing the lien. The notice must:
- Be served by certified mail, return receipt requested;
- Contain the name and address of the seller of movables (you);
- Contain the general description of materials / movables provided;
- Contain a description sufficient to identify the immovable property against which the lien may be placed;
- Contain a written statement of the seller’s rights (your rights) for the total amount owed, plus interest and recording fees
If you sold the materials/movables to a subcontractor on the project, the notice must be sent certified, return receipt mail to both the owner and the general contractor.
Conclusion
This blog post discusses the most important and prominent notice requirements within the Louisiana Private Works Act. If you are looking to lien a non-paying construction project, you should familiarize yourself with the Private Works Act and consult with an attorney to ensure that you meeting all the requirements to filing.
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