Collecting payments from contractors can be frustrating. Contractors generally won’t pay their subcontractors until they have been paid by the owner or are reassured payment is coming. However, in addition to subcontractor rights in their contract with the general contractor or owner, a Louisiana subcontractor has alternative means of collecting payment due on private construction projects.
Louisiana Private Works Act
The Louisiana Private Works Act is codified by LA R.S. 9:4801, et seq. The Act provides claimants including subcontractors, laborers, and consultants with claims against the owner and contractor on a project to secure payment for the price of the work and materials used.
While subcontractors general don’t contract directly with the owner of the project, claims against the owner are secured by filing claims of privilege or liens against the property. However, these documents can be technical and mistakes can be fatal to one’s claim.
Notice of Contract
One of the first factors in determining your lien rights depends on whether the general contractor filed what is called a Notice of Contract. Under the Private Works, if the price of the work stipulated to or reasonably estimated exceeds $25,000.00, a general contractor does not have the right to file a lien on the property unless a notice of contract is timely filed.
A Notice of Contract must be filed with the recorder of mortgages of the parish in which the works is to be performed before the contractor begins work. The Private Works Act mandates that a Notice of Contract contain the following:
- Notice shall be signed by the owner and contractor.
- Notice shall contain the legal property description of the immovable.
- Notice shall identify the parties and give their mailing addresses.
- Notice shall state the price of the work or describe the method by which the price will be calculated.
- Notice shall state when the payment is to be made.
- Notice shall describe the general terms of the work to be done.
One important feature to note is that subcontractors can still file a lien if the general contractor failed to file a Notice of Contract; however, they have to act fast.
Notice of Termination
If a Notice of Contract has been properly filed, subcontractors can file their liens and deliver a copy to the owner within thirty days after filing a notice of termination of the work. A Notice of Termination must contain the following elements:
- Shall reasonably identify the immovable upon which the work was performed and the work to which it relates. If the work is evidenced by a notice of contract, reference to the notice of contract as filed or recorded, together with the names of the parties of the contract, shall be deemed adequate identification of the immovable and work.
- Shall be signed by the owner or his representative.
- Shall certify that:
(a) The work has been substantially completed; or
(b) The work has been abandoned by the owner; or
(c) A contractor is in default under the terms of the contract.
- Shall be conclusive of the matters certified if it is made in good faith by the owner or his representative.
While some contractors file the architect’s certificate of substantial completion as a Notice of Termination, it should be noted that the certificate only covers most of the material necessitated by the Act and does not reference the Notice of Contract or provide a legal property description.