Alabama Lien & Bond Claim Masterclass with Adam Jarvis: What They Don’t Teach You (But Should)

In this blog, presented by SunRay Construction Solutions and Adam Jarvis, Attorney, Jarvis Law Firm P.C., we explain best practices around written contracts, securing lien and bond rights, avoiding common legal pitfalls, and properly exchanging lien releases for payment in Alabama.

Why a Written Contract Is Essential

Contractors are strongly encouraged to work under a written contract. Many trade professionals rely on written estimates that are accepted verbally over the phone, but this approach creates unnecessary legal risk.

Under the Alabama Prompt Pay Act, a written contract is required to recover statutory interest and reasonable attorney’s fees. The statutory interest rate approximately 7.5% can accumulate quickly, making these protections financially significant.

If estimates are used instead of formal contracts, contractors should include clear language stating that the signed estimate becomes a binding contract upon acceptance. This removes ambiguity in court and makes enforcement far easier.

What a Strong Contract Should Include

A properly drafted contract should clearly identify:

• The contractor and the property owner

• The property where the work will be performed

• A detailed scope of work

• The contract price

• A signed acceptance by the owner

A detailed scope of work is especially important. Vague descriptions often lead to disputes, with owners assuming additional work was included. A clear scope allows contractors to rely on the contract and require signed change orders for anything beyond it.

Managing Change Orders Correctly

Disputes frequently arise over unpaid change orders, particularly in residential construction. Best practice is to use formal change order documents rather than emails or text messages, with signatures from both parties.

If the project is financed, lenders should be kept informed of any changes, especially if they exceed the approved construction budget. Ideally, change orders should be paid before the additional work begins. While this is not always practical, unpaid change orders carry significant risk, particularly when they fall outside the original loan approval.

Understanding Lien Rights in Alabama

To claim lien rights, contractors must complete their work in a good and workmanlike manner and free from material defects. One of the most critical aspects of lien law is timing.

Recording Deadlines

• Prime contractors must record a lien within six months of the last day work was performed or materials were delivered.

• Subcontractors and material suppliers must record a lien within four months of the last day of work or delivery.

Once recorded, a lien must be enforced by filing suit within six months after the entire debt becomes due. While contract terms may extend this deadline, filing earlier is generally safer.

Notice Requirements for Subcontractors and Suppliers

Subcontractors and material suppliers must give written notice to the property owner before recording a lien. This notice typically includes:

• Identification of the property

• The amount owed

• A brief description of the work or materials supplied

Notices are usually sent by certified mail and often copied to the general contractor. While the statute does not specify an exact notice period, providing at least one to two weeks is common practice.

Unpaid Balance Liens and Their Limits

Subcontractors and suppliers generally hold an “unpaid balance lien,” meaning the lien is limited to the amount the owner still owes the prime contractor. If the owner has already paid the prime contractor in full, the lien may be invalid, leaving the claimant to pursue the contractor directly.

Before filing a lien, subcontractors should attempt to confirm whether an unpaid balance still exists.

Special Protection for Material Suppliers

Material suppliers can secure a full-price lien if they provide advance written notice to the owner before delivering materials. This notice must specify what materials will be furnished and at what price. If the owner does not object, the supplier’s lien is not limited by the unpaid balance owed to the contractor.

Alabama law provides a statutory form for this notice, and using it helps avoid disputes over validity.

Bond Claims on Public Projects

Lien rights do not apply to public property, but bond claims serve a similar purpose. Bond claims are contractual and involve a surety or insurance company rather than real property.

To pursue a bond claim:

• A 45-day written notice must be sent before filing suit

• Suit must be filed within one year from the owner’s final payment

Successful bond claimants may recover reasonable attorney’s fees in addition to the unpaid amount.

Pay-If-Paid Clauses and Bond Claims

If a subcontract contains a clear pay-if-paid clause, Alabama courts typically enforce it. In such cases, subcontractors may only claim amounts the owner has already paid to the prime contractor, including retainage. Bond claims may need to be amended if additional payments are later made to the contractor.

Because bond claims involve insurance companies, detailed documentation is essential. Claimants should be prepared to provide subcontracts, payment applications (paid and unpaid), and receipts for project-related expenses.

Common Lien Law Mistakes to Avoid

Contractors should not file liens if:

• The work was not completed

• There are major uncorrected defects

• They were not properly licensed for the work

Unlicensed contractors generally do not have lien rights and may be exposed to liability for the owner’s legal fees.

Accuracy also matters. Lien documents should correctly identify the property owner, the party owing payment, and the property itself. While a street address may suffice under Alabama law, parcel numbers or full legal descriptions are safer—especially in new developments where addresses may not yet be finalized.

Exchanging a Lien Release for Payment Safely

The safest way to exchange a lien release for payment is in person, handing over the signed release at the same time the check is received. If distance prevents this, parties should coordinate carefully, exchanging scanned copies of the release, check, and mailing envelopes to ensure accuracy and prevent errors.

Final Takeaway

Payment protection in Alabama construction projects depends on preparation, documentation, and strict attention to deadlines. Written contracts, detailed scopes of work, proper notice, and timely filings are not optional—they are essential tools for protecting cash flow and avoiding costly disputes.

By following these best practices, contractors, subcontractors, and suppliers can significantly improve their chances of getting paid for the work they perform.

Frequently Asked Questions (FAQs)

Can a lien be amended if the original filing is still within the deadline?

Yes. A lien can be amended as long as the claimant is still within the statutory deadline to file the lien. Amendments are fairly common and typically relate to changes in the lien amount or other details. Since the original filing already placed all parties on notice, amending the lien does not create an issue. The amendment should clearly reference the original lien filing, including the book and page number or instrument number.

Can a property owner record lease provisions that prohibit liens on a commercial project?

This situation can be highly fact specific. While it is common to see contract provisions that attempt to waive lien rights—sometimes even before work begins—the enforceability of such provisions depends on the circumstances and the documents involved. Questions about whether a lien can be prohibited by lease provisions, or whether a lien can attach to a tenant’s interest instead of the real property, should be reviewed by a local construction attorney with the specific lease and project documents in hand.

If a private commercial project is bonded, can both a lien and a bond claim be filed?

In the case of a privately owned project that has been bonded, it may be possible to pursue both a lien and a bond claim. Most bonded projects are public works, where liens are not permitted and bond claims are the sole remedy. However, if the project is privately owned and bonded, filing both may be an option. This scenario should be evaluated carefully based on the project structure and applicable contracts.