The Louisiana preliminary notice rules were changed recently by HB 203, and so were some other notice requirements. There are a lot of changes, so let’s attack them notice-by-notice. These changes took effect on January 1, 2020.
Changes Made to the Louisiana Preliminary Notice Rules
There are lots of changes, so let’s dive right in. If you’re curious about all of the changes made by HB 203, beyond notice, you can read our overview here: Louisiana Mechanics Lien Rules Updated by Passing HB 203.
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1. Notice of Contract
A Notice of Contract is a notice generally filed by the project’s prime contractor. It effectively acts as a Notice of Commencement.
Before, a Notice of Contract was required for projects costing $25,000 or more. That was a low bar, so the Louisiana legislature raised it. Now, a Notice of Contract must be filed for all projects $100,000 and up.
What’s more, a Notice of Contract no longer requires a legal property description to be valid. Instead, a “complete property description” must be included. That refers to “any description that, if contained in a mortgage of the immovable properly filed for registry, would be sufficient for the mortgage to be effective as to third persons.”
2. Notice of Lease
Equipment rental companies have a specific preliminary notice requirement, called a Notice of Lease. This is a pretty tough requirement to stay on top of – currently, a Notice of Lease must be sent within 10 days of first furnishing.
The timeframe for sending a Notice of Lease was moved from 10 days up to 30 days from first furnishing. Further, parties sending a Notice of Lease no longer have to send the notice to their direct customers.
3. Notice of Nonpayment
This is a tough requirement for Louisiana material suppliers. A Notice of Nonpayment is a notice that must be sent monthly in order to preserve lien rights. Additionally, the notice must be sent at least 10 days before a material supplier can file a mechanics lien.
That 10-day requirement before filing a lien is eliminated. It sort-of reappeared in the form of a voluntary notice, but we’ll get to that in the “Final Notice of Nonpayment” section below. A Notice of Nonpayment must still be sent monthly in order to preserve the right to lien. Ultimately, this removes one of the many barriers for Louisiana material suppliers face when trying to secure a lien. Still, sending something like a Notice of Intent to Lien might be a good idea before filing a lien.
4. Design Professional Notice
This is a new preliminary notice requirement for design professionals, so the name of this notice is subject to change. Also, design professionals are now referred to as “professional consultants” and “professional subconsultants”.
This notice requirement is entirely new. Design professionals who were hired by someone other than the property owner must now send preliminary notice to the property owner in order to preserve their right to lien. The notice must be sent within 30 days of being hired.
Are you familiar with the current Louisiana preliminary notice rules?
5. Notice of Termination
A Notice of Termination is essentially a Notice of Completion. This document signifies the completion or abandonment of the project (or, at least a specific part of it). A Notice of Termination puts a clean end-date on the project, and when a Notice of Termination has been filed, some lien claimants’ timeframe for filing a lien will be shortened.
There are actually 2 big changes coming with the Notice of Termination, after January 1, 2020: (1) GC’s can force owners to file a Notice of Termination, and (2) the rules on subs, suppliers, and equipment rental companies requesting a Notice of Termination have changed.
Also, a small change – a “legal” property description is no longer required. Just like the new Notice of Contract requirement above, a “complete” property description must be included.
1. GC’s can force a Notice of Termination filing
Upon substantial completion, if a GC requests that an owner file a Notice of Termination, the owner must file a Notice of Termination within 10 days of the GC’s request.
2. Requesting a copy of the Notice of Termination
Knowing whether a Notice of Termination has been filed is really important for everyone who provides labor or materials on a Louisiana construction project. If one is filed, it will shorten the timeframe to file a mechanics lien on the project. Because this is such important information, any project participant can request that they get a copy of the Notice of Termination, if one is filed.
We call this the “Notice to Owner of Obligations”. And, when an owner receives a Notice to Owner of Obligations, that owner is required to provide a copy of the project’s Notice of Termination, if one gets filed. But what happens if they don’t send a copy of the Notice of Termination?
Previously, the penalty for an owner who didn’t send a copy of the Notice of Termination was pretty soft. It allowed for the claimant to recover “all costs and attorney’s fees for the establishment and enforcement of the claim or privilege.” But, if a Notice of Termination isn’t given, there’s a huge chance the claimant would lose any and all ability to make those claims, anyway.
That’s what gets cleaned up in January. Under HB 203, the claimant won’t be able to file a lien, but they’ll still be able to file a claim against the owner.
6. Notice of Lien Rights
For work done on owner-occupied residential projects, prime contractors must send a Notice of Lien Rights before they begin work. This is a simple requirement since the Louisiana Private Works Act provides the form right there in the statute.
The form was completely updated. Now, it’s a much friendlier, easier-to-read form. You can give it a read for yourself here on pages 60-61. If you’re looking for the old version, we’ve got you covered: Louisiana Notice of Lien Rights Form.
7. Final Notice of Nonpayment (Voluntary)
This notice is new, though it sort-of mirrors an old Notice of Nonpayment requirement. It’s only available on residential jobs with no Notice of Contract, and it’s only available to parties hired by someone other than the owner, as well as suppliers or equipment rental companies hired directly by the owner.
If this document is sent at least 10 days before a claimant’s mechanics lien deadline, that deadline gets extended a bit. Specifically, the deadline will be moved to 70 days after a Notice of Termination (or after the substantial completion, if a Notice of Termination isn’t filed). This extends the lien deadline by 10 days, and since it’s sent at least 10 days before the old lien deadline, that adds up to 20 days for an owner to try and resolve the dispute before that lien deadline comes up.
That’s what this comes down to – it’s a way to try and avoid lien claims for smaller residential projects.
The Louisiana preliminary notice rules changed quite a bit on January 1, 2020. Not all notices will be drastically affected, but in the aftermath of such widespread amendments, all construction businesses should assess their lien policies and notice policies to determine whether they’re statutorily compliant and putting the business in the best opportunity to succeed at collecting payment.