Great Summary of Missouri Lien Law Changes from MoLien.com

Great Summary of Missouri Lien Law Changes from MoLien.comThe 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.

Read the full Missouri Lien Law Changes Analysis.

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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Scott Wolfe Jr

About Scott Wolfe Jr

Scott Wolfe Jr. is the CEO of zlien, a company that provides software and services to help building material supply and construction companies reduce their credit risk and default receivables through the management of mechanics lien and bond claim compliance. He is also the founding author of The Lien and Credit Journal, a leading online publication about liens, security instruments and getting paid on every account. Scott is a licensed attorney in six states with extensive experience in corporate credit management and collections law, with a specific emphasis on utilizing mechanic liens, UCC filings and other security instruments to protect and manage receivables. You can connect with him via Twitter, LinkedIn and Google+.

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  • http://www.MAREInet.com Kim, the Real Estate Investor Association Director

    I am not a contractor, I buy and sell houses. We utilize a lot of subcontractors and suppliers in the process, our next project we are looking at $80,000 or more in renovations in one house. Luckily this one is in KS.

    But this new law, while I can see why the people providing title would want to improve upon the lien laws, seems really cumbersome and unfair to everyone that the liens would affect the most: the people getting paid and the people writing the checks.

    So how does the law work for the property owner. I buy a house today that I plan on renovating and selling. I don’t know who I will sell it to or when. So do I buy, and go file a “Notice of Sale” today, just to make sure it gets filed. And can I sell it with out this “Notice of Sale” I will be using contractors, that I know will not be filing mechanics liens cause we have worked for them for years. But being good business people, they should go file a Notice of Rights as soon as they start my job. Then come closing time we all have to file lien release. Big mess.

    Is there anyone in a construction association that might want to work with some property owner and landlord associaitons to maybe try to get this law amended to work a little better?

    • http://www.expresslien.com Scott Wolfe Jr

      Hi Kim – Thanks for stopping by and for the comment. You touch on some very important points about this issue. Unfortunately, the laws that are passed every day by all these legislatures across the country completely miss their intentions. The laws are intended to protect folks…but, at the end of the day, no one knows that the laws or there, and if they do know, the law is so complex and convoluted it’s rendered rather worthless.

      The only answer is to get a professional (lawyer, etc.) to help you out with this, so they can look at your situation and properly advise.

      Good luck!

    • http://www.expresslien.com Scott Wolfe Jr

      Hi Kim – Also, your comment inspired me to draft a post about this issue (the rub between Real Estate Investors like yourself, and this new law). The post also highlights a similar post over at the Mid-America Association of Real Estate Investors blog.

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  • Michael Robinson

    Do you have a form that would comply with the Missouri Notice of Rights?
    Thanks

    • http://www.expresslien.com Scott Wolfe Jr

      Hi Michael – Thanks for reading and for the comment. Right now, that is not one of the forms made available for use on our website free of charge.

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  • bob

    i’m a carpenter by trade , but my son is self employed and has been working on a room addition w/ a 4car garage and living space above that . the homeowner say he paid the GC all my son did was provide labor, no material .he’s been there 5 months now the GC says he’s not going to pay him that he will finish it himself he’s fired , with only 3 days left to finish the job . by this new law looks like all he can do is CRY, with nobody to be able to be forced to pay. TIME TO GET OUT OF CONSTRUTION EVERYBODY’S OUT TO GET SOMETHING FOR NOTHING . BOB

    • http://www.zlien.com Scott Wolfe Jr

      You may want to check with an attorney about this, as laborers are usually always protected under mechanic lien laws. You can find an attorney in your area or ask them questions online at http://www.avvo.com