In this blog, presented by SunRay Construction Solutions and Lynn P. Thompson, Attorney, Biggs, Ingram, & Solop, PLLC, a construction lien law bond claim law attorney, you will learn in detail about the how to ensure that you are paid successfully once your lien is recorded.
The basis of this webinar is that you have properly filed a lien which means that you fall under the category of proper lien claimant, such as the prime contractor, first tier subcontractor, second tier subcontractor, or a materialman who has provided materials to a contractor or a first-tier subcontractor. It also means that you have complied with all the particulars of filing a lien.
Mind Your Corporate Particulars
There are a couple of things that you need to be really careful about. You must ensure that these are correct when you are ready to file the action to enforce your lien.
a. The first point action to take note of is that you must maintain active registration with the Mississippi Secretary of State. So, if you are an entity operating in Mississippi, then you must be registered with the Secretary States Office and also have a good standing if you want your lawsuit to be considered viable.
b. Next point to consider is that you must have a current Certificate of Responsibility. So, if the work for which you have filed the lien requires you to have the Certificate of Responsibility, then you must ensure that you have this certificate which is issued by the State Board of Contractors. Sometimes when you file a lien, the owner or the contractor may request a copy of this certificate. Also, remember that if you are not in compliance with the Certificate of Responsibility statutes, then your lien is not deemed viable.
c. Finally, always ensure that you sue in the name of the correct business entity. If you fail to do so or file a lawsuit in the personal name of the person with whom you have entered contract, then the lawsuit may get dismissed.
If you have filed a lien and it results in payment or if the contractor or subcontractor comes up with an amount that you are willing to accept, it means that the lien results in satisfaction or settlement. In such cases, you will need to file a cancellation of the lien in the record office of the chancery clerk.
If you fail to file this Notice of Cancellation, then you will need to pay a penalty. Ideally, this Notice of Cancellation should be filed within 15 days after you have received a written demand. If you don’t file it, then you will need to pay a penalty of $500 per day. So, please make sure that if your lien is satisfied, then file the Notice of Cancellation as per the timelines.
Lien Action and Payment Action – Definition
If in case your payment is not made even after filing your lien and if the owner or the contractor refuses to agree that you are entitled to that amount, then you will need to enforce your lien. There are couple of ways for you to do this.
a. Lien Action – You can file a lien action which is a civil action against the owner and the property itself.
b. Payment Action – You can file a lawsuit which does not get necessarily attached to the property but it does prove that there is amount owed to you.
c. Arbitration – The final way to enforce your lien is to demand for an arbitration.
Where and When to File Suit to Recover Amount?
So, where can you file your payment action? You can file it at the:
a. County Court
b. Circuit Court
c. Chancery Court
When should you file the payment action? The timelines to follow with regards to filing the payment action are:
a. Within 180 days after the date of filing for claim of lien; or
b. Within 60 days if a Notice of Contest is filed.
Important Note: You need to pay specific attention to lis pendens. A lis pendens is typically a filing in the court’s records which states that a particular property is under litigation. So, if someone doesn’t check the land records to look for a lien, they can look it up in the lis pendens record and find out that a lawsuit or some proceeding is underway for a specific property.
As per the Mississippi Supreme Court, it is mandatory that a Notice of Lis Pendens should be filed at the same time as when the payment action is filed. Failure to do so will result in the loss of your lien. So, if a contractor has timely filed a lien, has retained a counsel to file a timely payment action, but does not file the Notice of Lis Pendens until the claimant has enforced the lien, then the lien automatically is deemed invalid.
Payment Action – Timelines
a. If the claimant fails to commence a payment action within 180 days from the days of filing the lien, it renders the lien as null.
b. In some cases, when you file the lien, the owner or whoever is involved in the lien may file a Notice of Content of Lien. They are required to send this notice via registered or certified mail or statutory overnight delivery within seven days of filing the Notice of Contest of Lien.
c. If a Notice of Contest of Lien is filed, then the claimant will have only 60 days to enforce their lien action or payment action.
Arbitration is enforceable which means that you can file a demand for arbitration instead of a payment action. This means that an arbitration is essentially a substitute for the payment action; however, you will still need to comply with the Notice of Lis Pendens. So, you will need to file a Notice of Lis Pendens to represent that an arbitration is in progress and this information can be found in the Lis Pendens records at the Court.
It is also recommended that you file an actual lien action in the appropriate court noting that an arbitration is underway. This will ensure that there is no question of whether your payment action was enforced in a timely manner or not.
How is Payment Action Commenced?
The commencement of payment action is like any other action. This means that the defendant or defendants will be summoned to appear and defend the action.
In case the payment action cannot be commenced due to the reasons set forth in Miss. Code Ann. 85-7-405(1)(d)(i), then the claimant can commence the lien action which is filing a lien against the property itself. However, it will involve some circumstances which require further investigation.
One key point to remember is that irrespective of whether you are commencing a payment action or a lien action, you must file the lis pendens.
Required Parties to Enforcement of Lien
Now, let’s understand whom you can sue. Ideally, it is not mandatory for you to sue the person with whom you have a contractual relationship. For example, if you are a sub subcontractor and you have not received the payment, you do not have to involve your subcontractor with whom you have the contractual relationship. Instead, you can directly sue the owner or the contractor. Just ensure that you are filing your suit against all the necessary parties which may or may not include the person with whom you have your direct contractual relationship. An important point to remember is that when you file the suit, any person who is above you in the chain can intervene.
Action Against Owner to Enforce Lien
You can file a lien action against the property itself, but all the amount that is going to be owed will be under litigation. So, even though you are suing against the property, you need to be prepared for counterclaims or other grounds for challenging the owner or other parties who can intervene. So, ensure that when you file a lien action, your claim is as solid as possible so that the litigation can go smoothly.
Award of Attorney’s Fees to Prevailing Party
The prevailing party in an action to enforce the lien may be awarded attorney’s fees and other costs. So, if you are successful in pursuing your lien, then the Court may award you your attorney fees and other additional costs. However, if your lien is deemed invalid or excessive or not proper, then the other party may be considered as the prevailing party and the Court will award the attorney’s fees and other costs against you.
Priority of Construction Lien
All liens have equal priority. So, even if you are the first to file a lien, it will have the same priority as the other liens. Ideally, what happens is when there are multiple liens on the same project, there is a pro rata distribution among the lien claimants if they successfully pursue what is owed to them in a lien payment action.
Extinguishment of Lien if Payment Action Not Timely Filed
If the payment action or the lien action is not timely filed, then your lien will automatically become extinct. So, if your action is filed timely, then you simply don’t have a lien. If a Notice of Contest of Lien is filed, then you have 60 days to file your lien and if you don’t file your action timely, then the lien will expire in 90 days.
And, if there is no Notice of Contest of Lien filed, then you have 180 days to file your payment or lien action. If you miss this deadline, then your lien is gone. Also, it is important to note that you will not receive any notice or communication stating that your lien is expiring because the extinction of a lien is self-executing. Hence, it is really important that you comply with the time requirements of filing a lien but also with the time requirements of pursuing your payment or lien action.
Although filing a lien is not a difficult task for lawyers, they do need to get all the facts straight and be aware of all the necessary facts. This is why you should mark your calendars and comply with all the deadlines, so that your lawyer can successfully file a suit and you can also take the necessary actions when the time comes.