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.

While a subcontractor can typically lien any job by filing the proper documents within 30 or 60 days after stopping work, a general contractor lacks this kind of luxury. In most circumstances, a general contractor must begin preserving its rights to file a lien before any work begins on the jobsite.

Contracts More Than $25,000.00

If a construction contract exceeds $25,000.00, the general contractor must file a “Notice of Contract” with the proper recording office before beginning any work. Failure to file this document forfeits the general contractor’s lien privileges. If the general contractor later files a lien on the project, the lien will be filed improperly and removable at the general contractor’s expense.

Construction on Residential Properties

If your general contracting company is doing work on a residential building, you may be required to comply with the Resident Truth in Construction Act to preserve your lien privileges.

The Residential Truth in Construction Act mandates that the general contractor have any homeowner sign a rather lengthy “Notice of Lien Rights” waiver before work begins on a residential project. Failure to get this document signed results in a forfeiture of a general contractor’s lien rights. For purposes of this Act, a “residence” is defined as a dwelling occupied by its owner.

General Lien Requirements

Additionally, all the typical lien requirements apply to generals, including: timelines, necessity of a legal property description, identification of the parties and their mailing addresses, statement of when payment of the price is to be made and descriptions in general terms of the work to be done.

Importance of These Precautions and Filing a Lien

Taking the necessary precautions to preserve your right to lien a project is important and imperative. Liens are a priceless tool for your company to promptly collect on its account receivables and protect you company’s ability to get paid for its work.

Failure to understand and to meet the conditions of the Private Works Act can be fatal to your lien privileges. An improperly filed lien – while perhaps on the books – is a legal liability for your organization. An interested party can easily remove an improperly filed lien and the removal of the lien will quite possibly be at your company’s expense.

Zlien is experienced in filing liens and helping your construction company smoothly complete and collect on projects. Visit Zlien.com to begin filing your lien, or call us today to discuss how we can help your organization.