Update: Louisiana’s lien and notice laws changed on January 1, 2020, so some information in this post might be outdated. You can learn what changed and what rules apply here: Louisiana Mechanics Lien FAQs and Louisiana Notice FAQs.
When navigated properly, mechanics lien laws offer the construction industry’s most powerful remedy. While the threat of a lawsuit is scary enough, filing a mechanics lien directly and immediately threatens a property owner’s title. Hiding from a mechanics lien won’t make it disappear, so owners have no choice but to resolve the payment dispute.
Curious about the mechanics lien process? Check out our video: The Mechanics Lien Process in Three Steps.
How long do lien rights last?
Because mechanics liens provide a powerful tool for laborers and materialmen, lawmakers have surrounded them with a dizzying array of notice requirements and deadlines. Courts also acknowledge the substantial implications of a successful mechanics lien claim and strictly construe these requirements. One of the most important factors for both legislatures and courts is providing a cut-off date for owners after which they can rest assured that a lien won’t pop up to challenge their property title.
The right to file a mechanics lien exists for some period between the outset of work and a statutorily defined amount of time following the completion of work. This time frame varies from state to state. Regardless of location, it’s imperative to know exactly when the clock starts and stops for lien rights and how each party’s actions can affect the time frame. A recent Louisiana case helped clarify the timeline, though property owners might not like what they see.
Note: These deadlines changed on January 1, 2020
Louisiana Mechanics Lien Rules Updated by Passing HB 203
The Facts
W. G. Yates & Sons Construction Co. (“Yates”) was hired as general contractor to construct a casino in Lake Charles, Louisiana (my hometown!). At the outset of work, the project owner and Yates recorded a written notice of contract with the parish. During the project, the ownership interest of the casino was purchased by Golden Nugget Lake Charles, L.L.C. (“Golden Nugget”). By December of 2014, the casino was fit for occupancy. Yates and Golden Nugget signed a certificate of substantial completion signifying the end of the project.
The Case
As time passed, issues with the project arose. One year after the parties signed a certificate of substantial completion, Golden Nugget and Yates took to the courts. Up to that point, Golden Nugget withheld just under $19M from Yates “to protect itself against estimated damages caused by Yates’[s] contractual and other breaches.” In November of 2015 Golden Nugget, which is owned by CNBC’s “Billion Dollar Buyer” Tilman Fertitta, filed breach and negligence claims against Yates. This led to a counterclaim from Yates, who also filed a Claim of Privilege (mechanics lien) on the property.
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Yates’ lien was filed in December of 2015, over one year after the certificate of substantial completion was signed. In Louisiana, a general contractor only has 60 days to file a lien following the substantial completion of the project. Because Yates was far beyond the 60 day period to file a lien, Golden Nugget filed a motion to dismiss Yates’ lien as untimely. The district court agreed with Golden Nugget, and the case was dismissed. Yates appealed, claiming that because the notice of contract was filed at the outset of work, the project was not “substantially complete” until a notice of substantial completion was also filed with the parish. This lead to an incredibly detailed discussion about what defines substantial completion regarding Louisiana lien rights.
The Appeal
Here is the full text of Golden Nugget Lake Charles, L.L.C. v. W. G. Yates & Sons Construction Co.
On appeal, the court went into statutory analysis mode to determine exactly how long Louisiana lien rights last. The parties’ stances were simple: Golden Nugget contended that substantial completion referred to an event. Once the project was substantially complete, Golden Nugget argued, the clock to file a lien began ticking. In contrast, Yates argued that substantial completion referred to a document- specifically, the filing of a notice of substantial completion with the parish.
The court found that the statute was ambiguous on the matter. However, by analyzing the substantial completion provision within the context of the remaining Louisiana lien laws, and by looking to case law involving subcontractors and substantial completion, the court found in favor of Yates. The court held that Louisiana statute requires an owner to affirmatively act in order to cut off potential claims when a notice of contract has been filed.
Takeaway
Mechanics lien rights ordinarily have a definite start and end. However, this court found that when a project has been filed with the parish, lien rights do not expire until 60 days after a notice of completion has also been filed (regardless of when the project was actually finished). While Yates and Golden Nugget both signed the certificate of substantial completion in December of 2014, in the eyes of the law, the project could not really be complete until the notice of completion was recorded. This should be troubling for Louisiana property owners. By failing to record the certificate of substantial completion, Golden Nugget extended Yates’ lien rights indefinitely.
For more on lien rights, check out our one-stop shop for mechanics lien rights across the country, the Construction Payment Resource Hub. For more content on the Bayou State, read more articles specific to Louisiana on the blog.
