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Payment Rights for Contractors and Mississippi’s Construction Lien Law

By Steve Williams

Every contractor wants and expects to be paid for work performed which improves property owned by another person or entity. Often, however, payment is not forthcoming and in those situations contractors need to understand not only their rights with respect to breach of contract, but the possibility of asserting a “Claim of Lien” against the Owner’s property which can provide security for their payment.

Effective April 11, 2014, Mississippi enacted a brand new comprehensive construction lien law.[1] Historically, on private, non-bonded construction projects, contractors who had direct contracts with the property Owner had the right to file a lien against the property to secure payment for services rendered or materials supplied in connection with construction on the property. Subcontractors and material suppliers to the general contractor had no such right, but did have a right to send the Owner a letter alerting the Owner to non-payment by the prime contractor and potentially binding funds in the hands of the Owner sufficient to pay the subcontractor or supplier.

As a result of litigation in federal court[2] which declared unconstitutional Mississippi’s “Stop Notice” remedy for subcontractors and material suppliers, the Mississippi legislature totally revamped Mississippi’s construction lien law. All duly licensed persons who provide labor, material and construction services on private, non-bonded construction projects now have the right to file and pursue remedies for construction liens. This apparently includes anyone in the contractual chain no matter how far removed.

But the requirements for asserting such a “Claim of Lien” are very detailed and specific. They also carry potential liability for damages and attorney’s fees against the claimant if the claim is not properly made or pursued.

Some examples of the new requirements are the following:

1.  The Claim of Lien requires a specific form of notice to be filed in the land records of the Chancery Clerk where the property is located within 90 days following the last labor, services or materials provided;

2   Copies of the Claim of Lien must be provided to the Owner within 2 days of filing by statutory overnight delivery;

3.   The Claim of Lien must follow a statutory form which informs the Owner of the right to contest the Claim of Lien;

4.   A “Payment Action” and/or a “Lien Action” must be started within 180 days after the “Claim of Lien” is filed;

5.   Persons who don’t have a direct contract with the Prime Contractor or on projects that don’t have a Prime Contractor, persons who don’t have a direct contract with the Owner must provide notice within 30 days of the first delivery of labor, services or material as a pre-condition for asserting a Claim of Lien.

6.   On residential projects, the notice requirements are slightly different. Lien claimants must give the residential Owner notice at least 10 days before filing a Claim of Lien.

7.   The new law provides a method to “bond off” a lien with a bond equal to 110% of the amount of the Claim of Lien;

The new law also carries a number of penalty provisions which must be carefully considered. To knowingly file a false Claim of Lien will result in a penalty 3 times the amount of the lien claim. There is also a triple penalty to a contractor who fails to pay a subcontractor without good cause after securing a waiver and release of lien from the subcontractor. There is a $500 per day penalty for failing to cancel a Claim of Lien within 15 days after being fully paid.

In an action to enforce a lien, the Court is authorized to award attorney’s fees and costs to the prevailing party.

The information above is only a sample of the many changes and requirements of Mississippi’s new construction lien law. It is not intended to be a complete summary and should not be relied upon in filing a Claim of Lien. Owners, contractors, subcontractors, material suppliers and architects and engineers should consult an attorney when either filing a Claim of Lien or when responding to or defending a lien claim.

(If you need or require additional information, please contact Steve Williams of Young Wells Williams P.A. at 601-948-6100.)

[1] Miss. Code §§85-7-401 et. seq.
[2] Noatex Corp. v. King Construction of Houston, LLC, 732 F.3d 479, at 484–86 (5th Cir.2013)

Steve Williams is a principal with the law firm of Young Wells Williams P.A., 141 Township Avenue, Suite 300, Ridgeland, Mississippi 39157, Telephone: 601-948-6100.

steve_williamsIn 40 years of law practice, he has extensive experience in most aspects of construction law matters including contract negotiations, pursuit and defense of construction claims and arbitration. He has helped resolve claims involving contract disputes, bid disputes, defective specifications, change orders, changed conditions, delay claims and terminations. He has also handled payment disputes, lien claims, bond claims and Miller Act claims. He has presented seminars or talks to various contractor groups and represents a number of contractors, subcontractors, suppliers and project owners. He received his B.A. degree from Davidson College and his J.D. degree from the University of Mississippi. Mr. Williams is a member of the Capital Area and American (member, Litigation Section and the Forum on the Construction Industry) Bar associations and the Mississippi Bar Association. He and his wife, Linda, have two children, four grandchildren and live in Madison, Mississippi.

BamSOUTH

BamSOUTH

Contributing Writer
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