Contractors & suppliers have strong lien rights in Kentucky. If a contractor or supplier isn’t paid on an Kentucky job, they can turn to filing a lien to speed up payment and protect themselves. However, there are specific requirements and rules that must be followed. Here are 5 essential things you need to know about Kentucky’s mechanics lien law.
1) Suppliers to Suppliers Do Not Have Lien Rights – Most Others Do
In Kentucky, the only project participants without mechanics lien rights are suppliers to suppliers. This means that prime contractors, subcontractors, sub-subcontractors, material suppliers, equipment lessors, and design professionals all have Kentucky mechanics lien rights. It is important to note that design professionals (architects, engineers, and surveyors) must be licensed in order to file. All other parties may not be required to be licensed, although it is always advisable to be licensed if a license is otherwise required.
2) Kentucky Preliminary Notice Dependent On Project Tier and Project Type
Kentucky does not require any notification prior to the beginning of work, but some parties are required to provide notice within a certain amount of time after last furnishing labor and/or materials to the project, and prior to filing a valid Kentucky mechanics lien.
On owner-occupied residential projects, a preliminary notice must be sent by all parties without a direct contract with the property owner within 75 days after the date of last furnishing labor or materials to the project. Note that any mechanics lien on an owner-occupied residential project is not effective to the extent the owner has paid the contractor, subcontractor or architect prior to receipt of notice, so for full protection, the lien claimant must send the notice prior to any payment by the property owner.
On all other residential projects, and all commercial projects, notice must be sent no later than 75 days after the last furnishing of labor or materials to the project if the claim amount is less than $1000, and no later than 120 days after the date of last furnishing labor or materials if the claim is greater than $1000.
In any case, a failure to send the required preliminary notice will result in the fatality of the lien.
3) Pay Attention to the Lien Deadline and Don’t Forget to Inform the Property Owner after Filing
The deadline to file a Kentucky mechanics lien is the same for all parties – 6 months from the date that the project participant last provided service or materials. Within 7 days of filing the lien, it is imperative to send a copy of the lien statement to the property owner. Although the notice can be sent through regular U.S. mail, it’s preferable that it is sent through certified mail (return receipt requested) so because without proof that the notice was sent to the owner, the lien is not valid. Once the lien is filed on a private project, the claimant must initiate an action to enforce the lien within 12 months.
4) A Lien in Kentucky Does Not Require a Legal Property Description
The state of Kentucky does not specifically require a legal description of the property. Kentucky statute requires a lien statement to include a “description of the property intended to be covered by the lien sufficiently accurate to identify it.” Note, however, that as we have discussed many times on the blog – the description considered “sufficiently accurate” may vary greatly even between counties. Further, even if the statute does not specifically require a legal description, certain county recorders may “require” one anyway. It is always the safest bet to include the best description of the property available – including a legal description if possible.
5) Competing Mechanics Liens May Need to Share Funds
Generally, Kentucky mechanics liens have priority over encumbrances on the property created after the mechanics lien attached. Among competing mechanics liens, there is no priority, and in a foreclosure action, all mechanics lien claimants will share funds pro rata assuming there is not enough to fully cover all claims. Further, the original contract amount is the cap on the recovery in any foreclosure action, and project participants that have filed liens must share this amount.
Kentucky subs need to send a Notice before filing a Lien