The Louisiana legislature has updated Louisiana lien laws by passing HB 203. While most changes won’t take place until the new year, several changes take place immediately. In this Legal Update, we will review some of the most impactful changes to the law and how they will practically affect Louisiana contractors, laborers, material suppliers, and others.
Immediate Changes to Lien Priority and Challenging a Mechanic’s Lien
While lien priority order remains the same, the legislature slightly changed the language to remove what was previously regarded as circular logic that left much unclear. Laborers retain the highest priority, followed by subcontractors, suppliers, and equipment lessors, with prime contractors and design professionals bringing up the rear. The clarification came in that it is now clear that if a lien has a higher priority than another mortgage or lien, it also has priority over any lower priority mortgage or lien than the second mortgage or lien.
Cancellation of Improper Liens
The second immediate change affects Louisiana Revised Statute 9:4833 by making it clear that an owner can write a written request to a lienholder to have an improper lien removed within ten days of receiving the letter. Further, under the new LA R.S. 9:4833(E), if a lien expires, the owner can remove the lien on their own without any help from the lien’s claimant.
Changes taking place after January 1, 2020
There are new mechanic’s lien deadlines. If a Notice of Contract is not filed, all Louisiana mechanics liens must be filed no later than 60 days after the filing of a Notice of Termination or the substantial completion or abandonment of work if no Notice was filed.
If a Notice of Contract is filed, a prime contractor hired by the owner must file its lien no later than 60 days after a Notice of Termination is filed. If no Notice of Termination is filed, the deadline will be seven months from the substantial completion or abandonment of work. All other claimants have thirty days after a Notice of Termination, or six months after substantial completion or abandonment if no Notice of Termination is filed.
Preliminary Notice Requirements
If you were not hired directly by the prime contractor, in order to sue a prime contractor for payment or to pursue payment from the contractor’s payment bond, a subcontractor must give notice to the prime contractor at least thirty days before filing a lawsuit.
Under the new LA R.S. 4845, both parties can agree to forego old school, formal notice in favor of electronic notice. This seems likely due to the growing problems faced when depositing a piece of mail with the USPS. In the same vein, a notice is now considered “delivered” when it is placed for mailing with USPS.
Notice of Contract Requirements
In perhaps the most impactful change coming to fruition in 2020, the threshold for requiring a Notice of Contract has been raised from $25,000.00 to $100,000.00 of project cost.
Forcing an Owner to File a Notice of Termination
A popular delay tactic of leaving jobs open-ended will come to an end because general contractors can now request an owner to file a Notice of Termination once a project is substantially completed. Owners must comply within ten days of the request which will aid contractors in collecting final payments.