The following is a post submitted to us by MoLiens.com, which is a great site and service operated by Missouri construction attorneys Garry Seltzer and Kevin Seltzer. In light of the recent changes to the Missouri lien laws (which we posted about previously) they published a comprehensive update and analysis of the changes. The below is a summary of that update.
In May the Missouri Legislature passed a new mechanic’s lien provision that will have a profound effect on Missouri’s subcontractors. This new statute is a nightmare for Missouri’s construction industry.
The law addresses residential properties, but the term “residential” is now broadly defined in the new law to include apartments, condominiums, streets, sidewalks “and other facilities within the defined residential use structure or located on or within the separate and identifiable parcels identified as and for residential use.”
Missouri’s new mechanic’s lien legislation will make asserting mechanic’s lien rights much more difficult for subcontractors and material suppliers. The law takes effect August 28, 2010 and will apply to real estate closings on or after November 1, 2010. Because of the deadlines imposed by the new legislation we are encouraging material suppliers and subcontractors to file a “Notice of Rights” on every “residential” job — new or ongoing — beginning September 15, 2010. If you fail do so, you risk losing lien rights. This law was promoted by general contractors and title companies, all of whom gain at the expense of subcontractors and material suppliers.
The New Problem: Filing a “Notice of Sale” Means Mechanic’s Lien Rights May Be Lost.
The new lien law introduces two new concepts: (1) a “Notice of Sale,” filed by a property owner and (2) a “Notice of Rights,” filed by a subcontractor or material supplier. The new law provides that if the property owner intends to sell the real estate, even while construction is ongoing, then the property owner must give 45 days notice by filing a “Notice of Sale.” The earliest possible closing date which could be affected would be November 1, 2010. A “Notice of Sale” recorded as early as Friday, September 17, 2010 announcing a November 1, 2010 closing will forfeit the mechanic’s lien rights of suppliers and subcontractors who have not recorded a “Notice of Rights” by Wednesday, October 27, 2010 (five calendar days before the closing) even if their six month lien time is not close to expiring.
The new law requires a lien claimant to file its own “Notice of Rights” at least five days before the intended closing. If the lien claimant fails to file a “Notice of Rights” within the required time, then the lien claimant’s mechanic’s lien rights are lost forever — even if the job is ongoing — even if the six month time to file a lien has not expired. How does a subcontractor or supplier learn of the property owner’s “Notice of Sale”? There are three notification methods contemplated in the statute, each of which has its own problems (which are explained in detail in the accompanying analysis).
Before the law changed, suppliers and subcontractors had an objective standard about when to file a lien claim. Everyone knew a lien claimant had six months from furnishing the last labor or material to file a lien claim. But now if a property owner records a “Notice of Sale” that means that the existing six month time to file a lien claim is no longer operative. Failure of the subcontractor or supplier to record its “Notice of Rights” is an absolute waiver of lien rights forever, notwithstanding that under the former law there still may be time to file a lien.
The Solution: Suppliers and Subs Should File a “Notice of Rights” At The Beginning of Every “Residential” Job.
Because an owner may post a “Notice of Sale” at any time, we are urging our clients not to wait for the property owner to do so, but instead to record their own “Notice of Rights” at the earliest opportunity for every arguably residential job beginning September 15, 2010. A sample intake form which you may use to transmit the information necessary to generate a “Notice of Rights” to us is enclosed. You make additional copies to begin the process.
Even if the supplier or subcontractor files a “Notice of Rights” at the beginning of a job, the unpaid subcontractor or supplier must still file a lien claim within six months of finishing the job.
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- ALERT: Missouri Residential Lien Law Changes Now In Effect (zlien.com/articles)
- John Meyer’s Excellent Summary of Missouri Lien Law Changes (zlien.com/articles)
- Lien Law Online eLert for 8/23/2010 – Missouri (lienlawonline.blogspot.com)
- Are Mechanic Lien Laws Changing Across The Country To Require More Notice? (constructionlawmonitor.com)