Louisiana Mechanic’s Lien Changes Are in Effect!
It’s 2020 & the Louisiana mechanic’s lien changes are in effect! Last year we touched on a few changes, now let’s take a deep dive and review what you should know about the Louisiana statute changes which became effective 1/1/2020.
Louisiana – Private Projects & Mechanic’s Lien Rights
First up, the filing of mechanic’s liens (or privileges, as they are referred to in Louisiana). When looking at the new Louisiana lien statute, please remember the effective date of the statute may not immediately be obvious, especially for material suppliers and subcontractors who are not on the jobsite:
The old statute applies for all works:
i. Where a notice of contract was filed prior to January 1, 2020,
ii. A notice of termination was filed before January 1, 2020, or
iii. No notice of termination was filed before January 1, 2020, but the work was
substantially completed or abandoned before that date.
The new statute applies for all works begun on or after January 1, 2020, unless a notice of contract was filed prior to January 1, 2020.
An added caveat is that if completion occurred prior to January 1, 2020 and a Notice of Termination was filed on or after January 1, 2020, a general contractor’s lien must be filed by July 31, 2020, and all other liens must be filed by June 30, 2020.
Notice of Contract – Threshold Increased
The requirement for a Notice of Contract to be filed by a general contractor has increased from $25,000.00 to $100,000.00 under the new statute. If the general contractor does not file a required Notice of Contract, the general contractor will have no lien rights on that private project.
Unsure Whether a Notice of Contract Has Been Filed?
Conservatively, it would be best to follow the guidelines of the old statute if you are unsure whether a notice of contract has been filed, because the notice requirements of the old statute are more stringent than the newly revised statute.
As to determining whether a Notice of Termination was filed prior to 1/1/2020, or whether the work was substantially completed or abandoned prior to 1/1/20, La. R.S. 9:4822(1) provides for service of a notice upon the owner, prior to the filing of a Notice of Termination, substantial completion or abandonment, expressly requesting the owner to notify you of the filing of a Notice of Termination, substantial completion or abandonment.
Best Practice: Clarify your deadlines! If in doubt, track your deadlines using the most conservative calculation.
Lessor’s Notice, Relax!
An important component of the new statute is that the Lessor’s Notice, required of those providing rental materials, has been “relaxed.”
The notice no longer needs to be signed by the lessee and the lessor, and the terms of the agreement do not have to be included within the notice. Additionally, the deadline for the notice has been extended to within 30 days after first furnishing, and a late notice may be served, but the lien when later filed will be limited to those rents accruing after the notice is given.
Further, a general description of the rental materials being provided should be given, but a full description with specificity of the rental equipment being furnished will no longer be required. However, a written response must be provided to the owner or contractor if that information is requested by them after their receipt of your lessor’s notice.
Great news, right?! Keep in mind, if the project falls under the old statute, the more cumbersome notice should be served within 10 days from first furnishing, should be signed by the lessee and the lessor, and should include the terms of the agreement.
The new notice should be used only when you are certain that the project falls under the new effective date.
Notice of Lien Rights
For residential home improvements, the template for the Notice of Lien Rights has been modified by the statute that became effective 1/1/2020.
Notice(s) of Non-Payment
The requirement for the 75-Day Notice of Non-Payment has not changed. The notice should be served upon the owner and the prime contractor within 75 days from the last day of the month for EACH month in which materials were furnished, but within the period in which a lien must be filed.
Mechanic’s Lien Deadlines
As mentioned in an earlier blog, the Louisiana lien deadline is calculated by a combination of varying factors. This may include whether the project is residential, whether a Notice of Contract was recorded, where you are in the ladder of supply, if/when a Notice of Termination is filed, or the date of substantial completion or abandonment of the project.
That hasn’t changed, and the deadlines for filing a lien remain basically the same. However, the statute under the new effective date provides an end date for the filing. And, if furnishing to a residential project, serving a final notice of non-payment at least 10 days prior to filing the lien can extend the lien deadline to 70 days, instead of 60 days, if a notice of contract was not recorded.
Notice of Contract was not recorded:
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- File lien within 60 days after a Notice of Termination was filed, or, if no Notice of Termination was filed, within 60 days after substantial completion or abandonment of the project.
- On residential projects, subcontractors, suppliers and lessors may instead:
- Serve a final notice of non-payment upon the owner at least 10 days prior to filing the lien.
- File the lien within 70 days after a notice of termination or substantial completion or abandonment of the project, if no notice of termination is filed.
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Notice of Contract was recorded:
General Contractors:
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- File the lien within 60 days after a Notice of Termination is filed, or, if no Notice of Termination is filed, within 7 months after substantial completion or abandonment of the project.
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All Others:
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- File the lien within 30 days after a Notice of Termination is filed, or, if no Notice of Termination is filed, within 6 months after substantial completion or abandonment of the project.
- Serve a copy of the lien upon the owner within 30 days after the filing of a Notice of Termination
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It’s a LOT!
Without question, these are some big changes for Louisiana mechanic’s lien filers. It’s important to understand that any time statute changes, there is an adjustment period. Some adjustments will happen during initial implementation, while others may not surface until a dispute reaches the courts a few years from now. While there may be additional changes as we move forward, it is likely these changes will be minor.
If you have questions regarding the changes in Louisiana or how your rights may be impacted, please don’t hesitate to contact NCS.
