I. ADVANTAGES, DISADVANTAGES, & POTENTIAL PITFALLS
As a general rule, Georgias lien laws are strictly construed/interpreted against the lien claimant because of the impact a lien can have on a property owners title. Although more recent Georgia decisions have slightly modified the strictly construed standard for interpreting liens to a substantial compliance standard, the process for filing and perfecting a claim of lien remains a veritable minefield. With the input and assistance of lien claimants, property owners, legal practitioners, trade associations, and legislators, however, the lien statutes recently were amended to lend clarity and remove some of the hidden, yet avoidable, lien killing explosives.
The new statutes become effective March 31, 2009. Generally, liens filed under the old statute will remain subject to the statute applicable at the time of filing of the claim of lien. In large part, the drafters writing and legislators enacting the new legislation thought ahead to minimize the risk to lien claimants, lien filers, and practitioners. Because many of the time requirements under the current statutes have been expanded under the new statutes, compliance with the current provisions often will yield compliance with the new statutes, but not always. The remainder of this article will address some of the most recent significant changes to the lien laws, their purpose, and potential pitfalls associated with their application.
B. Timing is Everything!
Although compliance with timing requirements remains a critical component of both the old and new lien statutes, the new statutes substantially clarify timing requirements by specifying deadlines in days instead of months. PRACTITIONER'S TIP: Be wary of contractual provisions that fail to account for new time limits.
1. Filing a Claim of Lien: Three (3) Months vs. Ninety (90) Days
One of the first requirements outlined in the current O.C.G.A. 44-14-360 et. seq. is that the lien claimant must file his or her lien within three (3) months of the last day they furnished services, labor, supplies, or material to the project. In determining whether a lien was properly filed within the three (3) month period, one must consider whether the services, labor, supplies, or material performed or delivered were within the scope of the original contract, or repair or “punch list” work. While services, labor, supplies, or material performed or delivered within the scope of the original contract are clearly covered by the current lien statute, it is highly questionable whether repair or punch list work is within the current statute. Revisiting the site without performing work does not extend the time period in which you must file your claim of lien. Womack Industries, Inc. v. B.A. Equipment Co., 199 Ga.App. 660, 405 S.E.2d 880 (1991). A lien claimant must take a critical view of the labor, services, supplies, or materials performed or delivered in order to avoid the lien being contested. Therefore, if the work that falls within the three (3) month period is not work within the scope of the original contract or a change order, the property owner may argue that the lien was untimely filed and, therefore, unenforceable.
Furthermore, there are practical disadvantages and potential pitfalls to a three (3) month filing requirement. First, because the number of days within a three (3) month period will vary depending on the relevant months, lien claimants must compute with caution. For example, some months have 30 days while others have 31 (or, in the case of February, 28 or 29 days depending on the year). Additionally, a three (3) month filing period lends itself to varying interpretations. Specifically, a liberal interpretation of the three (3) month requirement (possibly by a lien claimant with a lien expired by one (1) day) would allow a lien claimant as many as ninety-two (92) days (i.e., May=31, June=30, and July=31), while a more conservative reading could limit the same three (3) month period to eighty-nine (89) days (i.e., February=28, March=31, April=30). Finally, the statutory language directing that a lien claimant must file within three months creates confusion as to the last day for filing.
For example, if the last day on which a lien claimant furnished services, labor, supplies, or material to the project was June 2, 2008, the lien claimant might expect that he or she has until September 2, 2008 to file his or her claim of lien. Yet, the Georgia Supreme Court, in Jones v. Kern, 101 Ga. 309, 28 S.E. 850 (1897), specifically held otherwise, stating: From the 6th day of May to the 6th day of August, in a given year, is more than three months. The Court further addressed the calculation of the last day for the three (3) month time period in U.S.Filter Disrib. Group, Inc. v. Barnett, 273 Ga. 254, 538 S.E.2d 739 (2000). In that case, the lien claimant last delivered supplies to a property on January 20, 1997, then filed a claim of lien on April 21, 1997. When the lien claimant filed suit to recover under a discharge bond, the trial court denied its motion for summary judgment, finding that the lien claimant had failed to comply with the three (3) month requirement. The lien claimant appealed, arguing that the time computation rules of O.C.G.A. 1-3-1(d)(3) should apply. That statute provides that when computing time periods, the first day shall not be counted but the last day shall be counted; and, if the last day falls on a Saturday or Sunday . . . [or] a public or legal holiday[,] the last day shall be the next business day. The Court of Appeals and Supreme Court disagreed. Affirming the trial courts denial of summary judgment, the Supreme Court found that O.C.G.A. 1-3-1(d)(3) was inapplicable because the lien statutes are in derogation of the common law and must be strictly construed in favor of the property owner and against the materialman. Consequently, if the last day of the three (3) month period falls on a Saturday, Sunday, public or legal holiday, the last day is not the next business day. Instead, the last day for filing and recording the claim of lien is the business day preceding the Saturday, Sunday, public or legal holiday on which the three (3) month period expires. In the U.S. Filter case, April 19, 1997 was the last day for the lien claimant to file and record a claim of lien, however, April 19, 1997 fell on a Saturday. Because O.C.G.A. 1-3-1(d)(3) is inapplicable to the lien statutes, the filing and recording deadline could not be extended to the following Monday. Thus, the actual last day on which the lien claimant could have filed and recorded its lien claim was Friday, April 18, 1997.
Applying the Jones and U.S. Filter cases to the earlier example of a lien claimant who last provided services, labor, supplies or materials to a project on June 2, 2008, the last day the lien claimant could file and record a claim of lien theoretically would be September 1, 2008. September 1, 2008, however, was a legal holiday (Labor Day). Notably, it also was a Monday. Because the filing and recording deadline cannot be extended to the following business day (Tuesday, September 2, 2008), the actual filing and recording deadline would have been the business day preceding Labor Day, or Friday, August 29, 2008.
Under the new lien statutes, which become effective March 31, 2009, the three (3) month time period has been changed to ninety (90) days. O.G.G.A. 44-14-361.1(a)(2), effective March 31, 2009. The new statute reads, in pertinent part, as follows:
(a) To make good the liens specified in paragraph (1) through eight (8) of subsection (a) of Code Section 44-14-361, they must be created and declared in accordance with the following provisions, and on the failure of any of them the lien shall not be effective or enforceable.
(2) The filing for record of his or her claim of lien within 90 days after the completion of the work, the furnishing of the architectural services, or the furnishing or performing of such surveying and engineering services or within 90 days after the material or machinery is furnished in the office of the clerk of the superior court of the county where the property is located.
The new law eliminates the apparent hazard in computing time limits based on months with varying numbers of days. Not only is calculating ninety (90) days from a date certain inherently easier than calculating three (3) months, but the legislature also gave the practitioner breathing room by statutorily mandating that O.C.G.A. 1-3-1(d)(3)applies apply to the lien statutes. O.C.G.A. 44-14-369, effective March 31, 2009. Again, that statute provides that when computing time periods, the first day shall not be counted but the last day shall be counted; and, if the last day falls on a Saturday or Sunday . . . [or] a public or legal holiday[,] the last day shall be the next business day. Whew. PRACTITIONER'S TIPS: You will want to find out from your client (or, in the event you represent a general contractor or landowner as defendant, ask of the opposing side in discovery) when the lien claimant completed the work. If your clients date of completion, furnishing of architectural services, or furnishing or performing of surveying or engineering services falls prior to the effective date of the new statute (March 31, 2009), but the claim of lien becomes due after the effective date, your client may want to consider filing his or her claim after the effective date. Finally, when your clients claim becomes due and whether you file under the current or new statutes will dictate whether O.C.G.A. 1-3-1(d)(3) applies to your clients case.
|Claim of Lien Becomes Due||Date Lien Filed & Recorded||Which law to Apply|
|Example 1||Jan 15, 2009||March 11, 2009||Current (pre-March 31, 2009) statute: lien claimant must file suit to perfect within 12 months of Jan 15, 2009|
|Example 2||April 20, 2009||June 25, 2009||New (effective March 31, 2009) statute: lien claimant must file suit to perfect within 365 days of June 25, 2009|
|Example 3||Jan 15, 2009||April 10, 2009||New (effective March 31, 2009) statute: lien claimant must file suit to perfect within 365 days of April 10, 2009|
|Example 4||March 31, 2008||June 17, 2008||Current (pre-March 31, 2009) statute: lien claimant must file suit to perfect within 12 months of March 31, 2008 (on or before March 30, 2009 to be within 12 months)|
2. The Initial Notice Requirement: At the time of filing vs. Two (2) Business Days
Under the current statute, [a]t the time of filing of record of his claim of lien, the lien claimant shall send a copy of the claim of lien by registered or certified mail or statutory overnight delivery to the owner or the property or the contractor, as the agent of the owner. O.C.G.A. 44-14-361.1(a)(2) (emphasis added). The at the time of filing language has created confusion for lien claimants, lien filers, and attorneys alike. Debate has ensued regarding whether at the time of filing meant that day, contemporaneous to filing, within 24 hours of filing, and so on. So what does at the time of filing mean? The answer, of course, often depends on who you ask. If you ask the lien claimant seeking to enforce a lien sent by certified mail the day after recording (which took place at 4:00 p.m. the previous day), you likely will hear the argument that the lien was timely sent. If you ask the attorney defending the property owner in a foreclosure action, the attorney likely will argue that the lien claimant had time to travel to the post office that day, failed to do so, failed to send a copy of the lien at the time of filing and, consequently, killed the lien. The advantage and disadvantage of the current statute are one in the same: namely, the at the time of filing language is subject to interpretation and flexibility.
To alleviate the confusion associated with the at the time of filing language, the new statute provides, in pertinent part, that no later than two (2) business days after the date the claim of lien is filed of record, the lien claimant shall send a true and accurate copy of the claim of lien by registered or certified mail or statutory overnight delivery to the owner of the property or if the owners address cannot be found, the contractor as the agent of the owner. Why two (2) business days? The choice of two (2) business days comes without explanation. The lien law subcommittee and advisory board, in their final drafts, recommended a seven (7) business day requirement. The modification from seven (7) days to two (2) days took place after the final draft proposal. Although a two (2) business day requirement eliminates the flexibility associated with the former statute, it lends certainty in that it runs from a date certain to a date certain. PRACTITIONER'S TIP: If your client filed a claim of lien on or after March 31, 2009 and failed to send a copy of the claim of lien to the owner or contractor via certified mail (registered mail or statutory overnight delivery) within two (2) business days of filing, the lien is INVALID. In certain instances, the lien also may be invalid where the lien claimant (or lien filer) failed to send a copy both to the property owner and to the general contactor. Stay tuned . . . (see Notice of Commencement and Notice to Contractor Section).
3. Perfecting the Lien: Twelve (12) Months v. 365 Days
The proper filing of a lien creates only tentative lien rights. Once a lien is properly filed in Georgia, it currently is valid for twelve (12) months from the date the claim became due, which is the last date labor, services, or materials were rendered to the project. Accordingly, before the twelve month period expires, the lien claimant must perfect the lien. To perfect the lien, the lien claimant must sue to recover the amount of the claim. O.C.G.A. 44-14-361.1(a)(3). It is important that the lien claimant sue the correct account debtor within the requisite time period; otherwise, the lien claimant may risk losing its lien rights.
The twelve (12) month requirement is absolute, and the Civil Practice Act renewal statute (O.C.G.A. 9-12-61) has no application to an action against the contractor to enforce a lien claim or an action to foreclose a lien. Accordingly, the twelve (12) month requirement will bar a later-filed attempt to perfect a lien. Yet, such a twelve (12) month filing requirement has the same inherent flaws of the three (3) month filing requirement discussed above. Specifically, some years have 365 days while other have 366.
The new lien statutes (effective March 31, 2009) change the twelve (12) month period to commence a lien action for the recovery of a partys claim to 365 days from the date of filing for record of his or her claim of lien. The important distinction is that under the new statute there should be no confusion based upon the month and days involved and the time period for filing the action. Moreover, the time period for filing has, in fact, been increased because a lien claimant will no longer be required to file the action twelve (12) months from the date the claim became due, but rather 365 days from the date of the filing for record of the claim of lien.
4. Notice of Suit: Fourteen (14) Days vs. Thirty (30) Days
Once the party filing the lien has successfully filed suit, there is one final step to perfecting his or her lien: preparing and filing a notice of suit (also known as a notice of commencement of lien action). The notice of suit must be filed in the county where the improved property is located, be signed under oath, and recite certain required information. If the notice of suit is not filed or does not contain all the required information, the lien becomes invalid. As set forth in O.C.G.A. 44-14-361.1(a)(3) and (4), a notice of suit must contain the following information to be valid: (1) the name of the correct property owner; (2) a legal description of the property liened; (3) the deed book and page number of the lien; and (4) the name of the party who filed suit, where they filed suit, the style of the suit filed, the number of the suit filed, and the date the suit was filed. Currently, the notice of suit must be filed within fourteen (14) days of the date the lien claimant filed suit. Id. If any of the above requirements are not performed, then the notice of suit is invalid and the lien will likewise become invalid.
In the past, the fourteen (14) day notice of suit requirement has placed an unnecessary burden on lien claimant/litigants and attorneys (and their staff). Often, lien claimants filing suit incurred the unnecessary expense of using a courier or overnight delivery service to deliver lawsuits to the court to expedite filing and case number assignment to a complaint. (Most courts have eliminated rush fee filing.) Despite this expenditure, they then had to spend an inordinate amount of time calling clerks offices to determine whether a case number had been assigned (an overwhelming task in some counties that will remain unmentioned). Between the backlog in clerks offices for filing new complaints and the inability to discover the information required to complete a notice of suit, the fourteen (14) day requirement leaves no room for human error. Once a lien claimant/litigant or attorney has all the requisite information to complete the notice of suit, it often becomes necessary to send the notice for recording by courier or overnight delivery to ensure either timely recording or timely return for error correction. As a result, the new lien statute (effective March 31, 2009) changes the time period for filing the notice from fourteen (14) days to thirty (30) days.
C. Definitional Clarification: The Lien Action
Under the recently enacted lien statutes (effective March 31, 2009) a lien action has been defined. O.C.G.A. 44-14-360(2.1). A lien action for purposes of this new Code section is defined to mean a lawsuit, proof of claim in a bankruptcy case, or a binding arbitration. This clarification addresses a current problem that many who practice in this area have experienced. Namely, many construction contracts require arbitration as a means of dispute resolution; however, there was no previous guidance as to whether commencing an arbitration was commencing an action for purposes of the lien statute. To technically comply with the current lien law, many attorneys were forced to file a lawsuit in state court, file a notice of suit, and then stay the state court proceeding pending arbitration. The definitional clarification has eliminated this need first to file suit.PRACTITIONER'S TIP: If the period for your client to perfect begins under the current statute but ends under the new statute and your clients contract contains an arbitration clause, you likely should err on the side of caution and file a lawsuit, file your notice of suit, and then stay the action.
D. Statutory Filing Fees
How many times have you or one of your staff members called a court or two or twelve to determine the filing fee for a claim of lien or related document? Just when you think your list of courts and their respective fees is complete and you distribute it to every staff member in your office, unknown to you, a court changes the filing fee. You hire a new employee. That employee consults your list and submits a notice of suit via overnight mail three days before the fourteen (14) day deadline. The filing fee has changed and once the court returns your notice with a sweet little handwritten note informing you that your check is $1.00 short, your fourteen (14) days have expired. Your heart skips a beat as you hurriedly check to make sure your malpractice insurance premium is paid.
The new statute rectifies filing fee inconsistency by setting amounts. Although recently amended O.C.G.A. 44-1-361.1 does not specifically state amounts, it refers to O.C.G.A. 15-6-77, which does. The new statute creates uniformity, effective March 31, 2009.
E. Notice of Commencement and Notice to Contractor
O.C.G.A. 44-14-361.5, titled Notice to contractor; Notice of Commencement offers property owners and/or general contractors the ability to bar remote lien claims filed by those not in privity of contract with the general contractor. Although the statute does not require an owner, agent of the owner, or contractor to avail him or herself of the protections offered by the statute, it does require the owner, agent, or contractor who wants to avail him or herself of the protections to adhere to its conditions. For example, should the owner, agent, or contractor choose to employ the statutes protections, then that owner, agent, or contractor must file a Notice of Commencement not later than fifteen (15) days after the contractor physically commences work on the property. O.C.G.A. 44-14-361.5. The notice must be filed in the office of the clerk of the superior court in the county where the construction project is located. Id.
If a Notice of Commencement is properly filed, certain lien claimants who do not have privity of contract with the contractor are required to file a written Notice to Contractor in order to preserve their lien rights. Id. These lien claimants are obligated to send the written Notice to Contractor both to the owner or agent of the owner and to the contractor for the project. Under the current statute, if these same lien claimants later file a claim of lien, they are obligated only to send a copy of the claim of lien (at the time of filing) either to the owner of the property or the contractor, as the agent of the owner. O.C.G.A. 44-14-361.1(a)(2).
The practical result under the current statute is that numerous property owners fail to receive notice that a lien has been filed, often because the general contractor neglects to inform the owner that he or she received a copy of the lien. The image most often associated with this unintended consequence is of a frail elderly lady who hired a general contractor to perform work on her property. The general contractor completes the work but, for whatever reason, not all the subcontractors receive payment. The elderly lady has no idea that a lien has attached to her property until she is served with a foreclosure action. As a practical matter, notices of commencement are typically utilized on commercial and/or industrial projects and the image of a little old lady in the above example rarely manifests itself.
In response to the above scenario, the legislature sought to amend the lien filing statute to direct that a lien claimant need only send a copy of the lien (at the time of filing, via certified mail or statutory overnight delivery) to the property owner. Yet, contractors associations disagreed, arguing that such an amendment would frustrate a contactors ability to defend his or her work and explain the lien to an upset property owner. These associations posited that general contractors could head off potential work disruptions if contractors also received a copy of the lien.
Accordingly, the lien statutes were amended such that in all cases in which a notice of commencement is filed with clerk of the superior court pursuant to subsection (b) of Code Section 44-14-361.5, a lien claimant shall send a copy of the claim of lien by registered or certified mail or statutory overnight delivery to the property owner and to the contractor at the address shown on the notice of commencement within two (2) business days of filing. O.C.G.A. 44-14-361.1(a)(2), effective March 31, 2009. The purpose of this new statute is to ensure that in all cases the owner is notified of a lien being placed upon the owners property and that in allcases a contractor (who has filed a notice of commencement) is notified that a lien has been placed upon the property which he or she has contracted to improve. This new statute also recognizes the potential fiction of the current law which states that the contractor is acting as the agent of the owner for purposes of receiving a copy of the claim of lien.
Yet, the new statute creates an enormous potential pitfall for the lien claimant, lien filer, and practitioner. If a general contractor has filed a notice of commencement and the lien claimant sends a copy of the lien to the property owner but not the general contractor, or vice versa, the lien will be invalid. PRACTITIONER'S TIP: Before advising a lien claimant client that his or her lien appears valid and that you are willing to sue on his or her behalf to perfect, ask whether a notice of commencement was filed and, if so, whether the claim of lien was sent via certified mail (registered, or statutory overnight delivery) to the property owner andto the general contractor within two (2) business days of filing.
F. Lien Expiration: On Its Face (Or in Yours)
Although the savvy attorney is acutely aware that the failure by a lien claimant to comply with any number of highly technical requirements will invalidate a mechanics or materialmans lien, many potential property buyers, title searchers and insurers, and loan officers see only a dreaded lien, clouding the title and the ability to transfer property. They may, only after several phone calls and extensive research discover that the dreaded lien has no consequence. By that time, a sale, refinance, or other transaction may be compromised. Eventually, the property owner may have to file a lien voiding action to clear his or her property title.
Until the recent legislative changes, only those well-versed in the lien laws knew that if no notice of suit timely followed the filing of a lien action within the statutory timeframe, a lien was invalid. To address the above-stated concerns, the legislature passed one of the most profound and sweeping changes in lien law history. Notably, the new statute requires that any lien filed after March 31, 2009 include the following language on the face of the lien in at least 12 point bold font:
This claim of lien expires and is void 395 days from the date of filing of the claim of lien if no notice of commencement of lien action is filed in that time period.
O.C.G.A. 44-14-367, effective March 31, 2009.
Indeed, the statute explicitly directs that failure to include such language shall invalidate the lien and prevent it from being filed. The purpose for including this language also is included in the statute: namely, to avoid the necessity of releasing or voiding of liens. As a result of O.C.C.A. 44-14-367s language requirement, a lien automatically becomes invalid from the language on its face where no suit to perfect and notice of suit (a/k/a notice of commencement of lien action) is filed within 395 days of the date of filing of the claim of lien. PRACTITIONER'S TIP: If your clients claim of lien was filed and recorded on or after March 31, 2009 and does not include the statutory language, THE LIEN IS INVALID! The importance of including this language in a lien cannot be emphasized enough. While a lien without the language should not be recorded by a Clerk of Court, it would be imprudent to rely on the Clerks office to assist you in ensuring the above statutory language is included in your lien.
G. Notice of Contest: It's New, It's Bold, It Could be a Ticking TIME Bomb for Your Client
To reiterate, under the new lien statutes (effective March 31, 2009) a lien automatically becomes invalid from the language on its face where no suit to perfectand notice of suit (a/k/a notice of commencement of lien action) is filed within 395 days of the date of filing of the claim of lien. Yet, the statutory revolution does not end there. A potential landmine lurks just around the corner in the final two sentences of O.C.G.A. 44-14-367 (effective March 31, 2009), which direct that a lien may expire earlier. To quote, A lien shall expire sooner and be disregarded once it is determined that no notice of commencement was timely filed in response to a notice of contest pursuant to Code Section 44-14-368. O.C.G.A. 44-14-367, effective March 31, 2009. Notice of contest? Timely filed?
Newly enacted O.C.G.A. 44-14-368, tilted Notice of contest of lien; lien extinguished 90 days after filing notice of contest if no notice of commencement of lien action filed, resulted from the joint efforts of drafters and the Governors Office of Consumer Affairs to reduce the number of frivolous liens. The Governors Consumer Affairs division experienced a substantial increase in the number of inquiries it received concerning frivolous liens. Under the current statute, a lien claimant who receives notice (from a property owner, for example) that a lien was frivolously filed has the statutory twelve (12) months to file suit to perfect that lien, despite such notice. Accordingly, the lien could potentially cloud a land title for up to twelve (12) months before a lien claimant is forced to litigate the liens merits.Further, a property owner would be forced to file an action for slander of title if he or she wanted to contest the lien prior to the lien claimant filing a lien perfection action.
O.C.G.A. 44-14-368 substantially shrinks the time period for filing a lien action where a lien claimant receives notice that the lien is being contested. The statute not only provides a strict time limitation, but also provides a notice form. The statute provides, in whole, as follows:
(a) An owner or an owners agent or attorney, or the contractor or contractors attorney, may elect to shorten the time prescribed in which to commence a lien action to enforce a claim of lien by recording in the superior court clerks office a notice in substantially the following form, in boldface capital letters in at least 12 point font, along with proof of delivery upon the lien claimant:
NOTICE OF CONTEST OF LIEN
TO: [NAME AND ADDRESS OF LIEN CLAIMANT]
YOU ARE NOTIFIED THAT THE UNDERSIGNED CONTESTS THE CLAIM OF LIEN FILED BY YOU ON, 20 __, AND RECORDED IN, PAGE ___, OF THE PUBLIC RECORDS OFCOUNTY, GEORGIA, AGAINST PROPERTY OWNED BY, AND THAT THE TIME WITHIN WHICH YOU MAY COMMENCE A LIEN ACTION TO ENFORCE YOUR LIEN IS LIMITED TO 60 DAYS FROM THE RECEIPT OF THIS NOTICE. THISDAY OF, 20__.
THIS ABOVE-REFERENCED LIEN WILL EXPIRE AND BE VOID IF YOU DO NOT: (1) COMMENCE A LIEN ACTION FOR RECOVERY OF THE AMOUNT OF THE LIEN CLAIM PURSUANT TO O.C.G.A. SECTION 44-14-361.1 WITHIN 60 DAYS FROM RECEIPT OF THIS NOTICE; AND (2) FILE A NOTICE OF COMMENCEMENT OF LIEN ACTION WITHIN 30 DAYS OF FILING THE ABOVE-REFERENCED LIEN ACTION.
(OWNER, CONTRACTOR, AGENT OR ATTORNEY)
(b) The clerk of the superior court shall cross-reference the notice of contest to the lien. The owner or his or her agent or attorney, or the contractor or his or her agent or attorney, shall send a copy of the notice of contest of lien within seven days of filing by registered or certified mail or statutory overnight delivery to the lien claimant at the address noted on the face of the lien. Service shall be deemed complete upon mailing.
(c) The lien shall be extinguished by law 90 days after the filing of the notice of contest of lien if no notice of commencement of lien action is filed in that time period. No release or voiding of such liens shall be required. This subsection shall not be construed to extend the time in which a lien action must begin.
In short, this new statute allows a general contractor or property owner to contest an allegedly frivolous lien by filing with the court clerk a Notice of Contest. If such a notice is properly filed and delivered, the lien claimant has only sixty (60) days from receipt of the notice (not 365 days) to file a lien action and thirty (30) days after that to file a notice of suit. If the lien claimant fails to file its lien action within the prescribed period, the lien will be extinguished by law 90 days after filing of the notice of contest. Statutorily invalidating the lien eliminates the added step, under the current law, of filing a lien release or lien voiding action.
The streamlined approach to frivolous lien invalidation likely offers comfort to property owners and general contractors alike. Lien claimants and their attorneys, however, must remember that receipt of a Notice of Contest makes the sands in the hourglass move at over six times the speed. Thus, as a finalPRACTITIONER'S TIP, if a lien claimant brings you a lien to perfect, or a general contractor or property owner brings you a lien action to defend, after inquiring whether the lien has complied with all other statutory requirements, ask your client the following questions pertaining to this new statute: (1) Was a Notice of Contest filed? (2) If so, did it conform to the statutory form regarding language? (3) If so, was it sent via registered or certified mail or statutory overnight delivery to the lien claimant at the address noted on the face of the lien within 7 days of filing? (4) If so, was the lien action commenced within 60 days from the receipt of the Notice of Contest? (5) If so, was a Notice of Suit/Notice of Commencement of Lien Action filed within 30 day of filing the lien action? If you receive a no response to questions (2), (3), (4), or (5), the lien likely is invalid.