Act Quickly To Avoid Losing Your Lien Rights On Construction Projects
The Tennessee Mechanic's and Materialmen's Lien laws are found in the Tennessee Code at Tenn. Code Ann. § 66-11-101, et seq. They are designed to help ensure that those who perform work or furnish material, services, equipment, or machinery for construction projects get paid. If they are not paid, the laws allow for a lien against the property that can be enforced by ultimately, if necessary, a sale of the property with the available proceeds being used for payment of the debt.
The lien laws provide specific time frames within which certain steps must be taken in order to avoid losing the lien or the priority of the lien. This article is to simply provide a brief summary of those time frames and to emphasize the importance of acting quickly to preserve the protections provided by the lien laws.
The lien laws provide for two different categories of lienholders, and the steps necessary for protecting the lien depends upon the category into which the lienholder falls. The first category is a prime contractor. This type of contractor is one who is in direct privity of contract with the owner. A prime contractor has a ninety (90) day time frame after the improvement is complete or abandoned to record a notice of lien in the office of the register of deeds in the county where the property lies. This recordation is necessary to preserve the priority of the lien. The prime contractor must also file suit to enforce the lien within one year after the improvement is complete or abandoned in order for the lien to continue beyond that one-year period.
The second category of lienholder is a remote contractor. A remote contractor is one who has a contract with someone other than the owner. An example of this category of lienholder is a subcontractor who has a contract with the general contractor as opposed to the owner. The steps and time frames applicable to a remote contractor for protecting its lien are different from those of a prime contractor. First, the remote contractor must serve the owner and prime contractor with a notice of nonpayment. This must be accomplished within ninety (90) days of the last day of each month within which work or labor was provided or materials, services, equipment, or machinery was furnished. Second, the remote contractor must serve a notice of lien on the owner no later than ninety (90) days after the date the improvement is complete or is abandoned. Within this same time period, the notice of lien must also be recorded in the office of the register of deeds in the county where the property lies in order to preserve the priority of the lien. Third, the remote contractor must file suit to enforce the lien within ninety (90) days from the date of service of the notice of lien.
These time frames for both prime contractors and remote contractors who are not paid timely on construction projects make it important for the contractors to seek legal counsel sooner rather than later if they wish to preserve their lien rights. Legal counsel will need sufficient time to gather the necessary information and to prepare the notices that are required to protect those rights. Also, there can be complex issues encountered for particular lien claims for which additional investigation and research may be needed. For these reasons, waiting until the last minute to seek legal counsel can result in there being insufficient time available to do the work necessary to properly preserve and protect the lien.
If you would like to speak to Reggie Keaton about this or any other matter, he may be reached at (865) 546-9321.