Construction Lien Law: Private Contracts in Louisiana

I spent a number of weekends last year (2005) in Louisiana helping storm victims "muck out" their homes, tarp their roofs and cut and haul trees out to the sidewalk. I don't say this to brag as their were certainly others who did a lot more than anything I did. I only mention it because given the destruction caused by Hurricane Katrina (and friends) there will be a lot of new construction in Louisiana during the upcoming years. I am aware of numerous local contractors who have closed up shop in Florida and moved to Louisiana to reap the profits that have come with insurance payouts. For good or bad, most of the Louisiana hurricane victims have decided to rebuild.

Given that introduction I have decided to post a memo I wrote a number of years ago on Louisiana Construction Lien Law. While some of the information may be outdated, it should provide a good starting point to those contractors now working to rebuild Louisiana's Gulf Coast. The memo has made this post quite a bit longer than most of my other posts but I think the information is worth the additional length.

The Memo
Despite some unusual terminology (Louisiana's law is based on the Napoleonic code, not English common law like the other 49 states), Louisiana lien laws are very similar to those of other states. However, like most states, Louisiana has its own unique requirements and subtle differences. General contractors are required to file a notice of contract or risk the chance of being precluded from filing a lien. Different classes of claimants are provided with distinct time frames in which to file the lien.
There is no statutory language addressing the issue whether a contractor can waive in advance its lien rights; however, there is at least one case implying that a party can contractually waive those rights in some circumstances. See Sam Marrs Equip. Co. v. C&J Printing and Sandblasting; 365 So.2d 592, 593 (La. Ct. App. 1978).

Persons Entitled to a Lien
Louisiana provides persons furnishing work or material, pursuant to a contract, the right to file a lien. Lienors include a) Contractors; b) Subcontractors; c) Laborers; d) Materialmen; e) Registered or Certified Surveyors and Engineers; and f) Licensed Architects.

As in most states, lienors are divided into privity and non-privity claimants. Persons having contracts with the owner are classified as privity claimants. Non-privity claimants are persons having contracts with a contractor, subcontractor or a contract that is one of a series of contracts emanating from the contractor. R.S. 9:4807. This distinction is important because each class of claimant is provided with different notice and time requirements.

What Owners Must Do
To achieve maximum protection under lien laws, Louisiana requires owners to provide two forms of notice in conjunction with improvements to property. Prior to beginning work on the improvement, the owner must file a notice of contract. Upon termination or completion of the improvement, the owner must file a notice of termination.

A written notice of contract, similar to a notice of commencement, must be signed by both the owner and the general contractor and filed with the clerk of court before the general contractor begins work on the project. Failure by the owner to file the notice of contract creates personal liability for the owner for liens filed by claimants. Continental Gas Co. v. Assoc. Pipe & Supply Co., 447 F.2d 1041, 1050 (1971). The notice of contract must a) contain a description of the property on which the construction is to be performed and the name of the project; b) identify the parties and give their mailing addresses; c) state the price of the work or if there is no fixed price, the method by which the price is to be calculated and an estimate of the price; d) state when payment of the price is to be made, and e) describe in general terms the work to be done.

Like the notice of contract, the notice of termination is designed to protect owners. The notice of termination must reasonably identify the property on which the improvement occurred, must be signed by the owner or his representative, and must certify the work has been substantially completed, abandoned by the owner or that the contractor is in default under the terms of the contract. R.S. 9:4822.

Privity Claimants
It is in the best interest of the general contractor to ensure the written notice of contract is filed prior to beginning work on the project. Failure to timely file a notice of contract will preclude a general contractor from obtaining a lien when the price of the work stipulated is in excess of $25,000. R.S. 9:4811.

In addition to ensuring timely filing of the notice of contract, privity claimants must file a signed notice of lien within 60 days of the owner filing a notice of termination or from substantial completion of the work. The lien must a) reasonably identify the property; and b) set forth the amount and nature of the obligation giving rise to the claim and reasonably itemize the elements comprising it.

An owner may require the contractor to provide a bond prior to starting the job to avoid future liability from work performed by non-privity claimants. Normally, only the owner may bring an action against the bond prior to the completion of the time specified for the filing of a lien. However, other claimants may bring an action 30 days after delivering a statement of lien to the surety. All actions against the bond must be brought within 1 year of the expiration of the time specified for the filing of a statement of claim. R.S. 9:4812.

Non-Privity Claimants
Non-privity claimants have two possible time periods in which they must file a lien. If a notice of contract has been filed, non-privity claimants must file a lien and deliver a copy of the lien to the owner within 30 days of the owner filing the termination of work notice. When no notice of contract has been filed, the non-privity claimant must file the lien within 60 days after a) the owner files the notice of termination of work, or b) the substantial completion or abandonment of the work, if a notice of termination is not filed.

The lien claim must be signed, reasonably identify the property, and set forth the amount and nature of the obligation giving rise to the claim and reasonably itemize the elements comprising it.

An additional avenue of protection allows non-privity claimants to provide the owner with notice of any obligation owed them which arises out of the contract. While discretionary, this notice provides non-privity claimants with the opportunity to maximize their time for filing the lien. Notice must be provided to the owner before he or she files the notice of termination of work or before substantial completion or abandonment of work. The notice must contain the nature of the work or services performed and a mailing address. Upon receipt of this notice, the owner is obligated to notify the claimant within three days of filing a notice of termination of the work; or the substantial completion or abandonment of the work.

In addition to the lien filing requirements and the discretionary notice to owner, subsubcontractors have further notice requirements. Subsubcontractors must provide written notice to the contractor within 30 days of the owner recording the notice of termination. Notice must state the amount claimed and the party for whom the material or service was furnished. The notice is to be served by registered or certified mail. R.S. 9:4822.

Enforcement and Discharge of Lien
Action on the lien must occur within 1 year of filing the lien. R.S. 9:4823. The lien may be discharged by depositing a bond, cash, certified funds or a federally insured certificate of deposit which shall guarantee up to 125% of the principal amount of the lien. R.S. 9:4835.
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