2021 State Law Updates to Mechanic’s Lien & Payment Bond Claims
Several states have enacted new legislative changes over the last couple of years to private mechanic’s lien claims and public bond claims-and it’s vital to your business that you stay up-to-date on these changes.
The attorneys at WFJ have compiled a summary of some of the recent changes that apply to commercial or government construction projects, and updated opinion letters for each individual state. Keep reading for a summary of these legislative changes.
Statutory amendments passed in 2019 expanded the coverage for bond claims on public projects. Similar to other states, the claimant is entitled to assert a bond claim if the claimant has a contract with the general contractor or with a subcontractor of the general contractor. As a result of these amendments, if the contract was entered into after August 28, 2019, a claimant is now entitled to assert a bond claim if the claimant has a contract with a sub-subcontractor or a material supplier.
However, the 2019 amendments added a notice requirement for material suppliers. If the claimant is a material supplier, and has a contract with a sub-subcontractor or another material supplier, the claimant must serve a final bond claim notice on the general contractor within 90 days of the claimant’s last date of providing material. The claimant is not required to serve a final bond claim notice on any party if the claimant is providing material and labor, regardless if their contract is with the general contractor, subcontractor, or sub-subcontractor.
Tennessee passed an amendment in 2020 to their lien statute which changed the requirements for serving a preliminary notice on a private commercial project. As a result, if a contract for a private project is entered on or after July 1, 2020, and the claimant has a contract direct with the owner, the claimant is not required to serve a “Notice to Owner.” Previously, if the contract was entered before July 1, 2020, and the claimant had a contract directly with the owner, the claimant was required to serve the “Notice to Owner” on the owner before the first date the claimant furnished labor or material.
The State of Arkansas passed amendments in April 2021, which made significant changes to its public and private bond claim statutes. The amendments affect the rules for serving a final bond claim, the deadline for filing a bond, and claims for rental equipment on public projects.
Starting in April 2021, if the claimant’s contract is with the subcontractor, the claimant must serve the final bond notice on the general contractor and surety within 90 days of the claimant’s last date. This new rule applies to both private and public projects. Previously, a claimant was not required to serve any notice to assert a claim against the payment bond for either private or public bond claims.
Beginning in April 2021, the lawsuit deadline for payment bonds, for both private and public projects, is now one (1) year from: (1) the date of final payment under the construction contract, or (2) the date the general contractor stops work on the construction project, whichever date is earlier. We recommend, however, that claimants follow the conservative lawsuit deadline of one (1) year after the “last date” the claimant furnished labor or material because the new statutory requirements may be difficult to track.
Finally, starting in April 2021, rental equipment is now covered under the payment bond for a public project. The prior Arkansas statutes did not clarify whether a claimant could assert a claim against the payment bond on a public project for rental equipment.
The State of Georgia has adopted new “Lien and Bond Waiver” forms which go into effect on January 2, 2021. In addition to the change in the waiver forms, the new law clarifies that waivers signed after January 1, 2021, do not waive contract rights but only lien and bond rights after the prescribed period of withdrawal. Before the passage of the new law, the statute was not clear whether all contract rights and remedies were waived when a prospective claimant waived their lien or bond rights.
Texas recently passed a bill which made significant changes to the rules and procedures for mechanic’s lien and bond claims. The changes apply to all new construction contracts entered on or after January 1, 2022. The prior mechanic’s lien and bond laws will continue to apply for prime contracts executed prior to January 1, 2022.
New preliminary notice requirements will go into effect on January 1, 2022. If the claimant has a contract with a subcontractor, the claimant is no longer required to serve a “2nd month notice” on the general contractor. The claimant must still serve the “3rd month notice”, as previously required, if the claimant’s contract is with the general contractor or subcontractor. Additionally, the form required for the “3rd month notice” has been modified.
The new Texas bill will change the lien foreclosure deadline. Starting January 1, 2022, the lien foreclosure deadline will be one (1) year from the last day a claimant may file the lien (the previous deadline was two (2) years). However, the lien foreclosure deadline can be extended for an additional year under a written, recorded agreement with the owner.
The notice requirements will change for “specially manufactured materials” when the new bill goes into effect on January 1, 2022. Under the new law, the claimant will no longer be required to serve any additional notices for “specially manufactured materials.” Instead, the claimant’s lien claim for “specially manufactured materials” will now be covered by the “3rd month notice.”
The preliminary notice form for retainage will contain new requirements starting on January 1, 2022. The modified form will require the claimant to provide a description of the project and to list the total retainage unpaid.
Starting January 1, 2022, if a payment bond has been recorded on a private project, claimants will be required to serve the preliminary notices to the original contractor and the surety. Previously, if a payment bond was recorded on a private project, claimants were required to serve the preliminary notices to only the original contractor.
The deadline to file a mechanic’s lien claim for retainage will be extended starting on January 1, 2022, and it will give claimants almost two additional months to file a retainage claim. The new retainage deadline will now be the 15th day of the third month that the project is completed, terminated, or abandoned. The previous deadline required claimants to file a retainage claim within 30 days after the date the project was completed, terminated, or abandoned (this deadline still applies to contracts entered before January 1, 2022).
Good news for claimants is that beginning on January 1, 2022, an owner will no longer be able to shorten the deadline for filing a lien. Prior to the new law, the owner could file an affidavit of completion, or notify subcontractors that the general contractor has been terminated or abandoned the project, which shortened the deadline for filing the mechanic’s lien to 30 days. A claimant, under the new law, must file a lien no later than the 15th day of the 4th calendar month after the month when the project is completed, settled, or abandoned.
Texas further amended their lien statutes by removing the requirement that statutory lien waiver and release forms be notarized. Starting on January 1, 2022, statutory lien waiver and release forms will no longer have to be notarized.
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