Note: Louisiana’s lien and notice laws changed on January 1, 2020, so some information in this post might be outdated.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.

This is a guest editorial post by Kurt Sorensen, the Corporate Credit Director for H&E Equipment.  The following was submitted to the Louisiana State Law Institute Security Devices Committee suggesting changes be made to Louisiana’s Private Works Act (i.e. the Louisiana mechanics lien laws).  Kurt was recently an instrumental player in lobbying the Mississippi legislature to make substantial changes to its mechanics lien laws, which resulted in cleaning up one of the nation’s most cluttered lien statutory frameworks to replace it with a clear, fair, and highly functional scheme.

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Louisiana Special Requirements for Lessors of Movables – a Disparate Burden

Louisiana’s special requirements for Lessors of Movables under Private Works Act LSA-R.S. 9:4802 (G)(1) [1] place several unique hurdles before the Lessor that are not required of any other provider of labor or material to the jobsite. The most difficult are:

  • The lessor of the movables shall deliver notice to the owner and to the contractor not more than ten days after the movables are first placed at the site of the immovable for use in a work.
  • The notice shall state the term of rental and terms of payment
  • and shall be signed by the lessor and lessee.

The conditions above make use of Louisiana’s lien statute by Lessors of Movables impractical at best. By itself, the ten day requirement makes use virtually impossible. As result, Lessors of Movables routinely don’t even try to comply and when they do, they are often in violation. The practical consequence is that without heroic effort, Lessors of Movables are denied rights the statute clearly intends they have, and are left as the only unprotected participant in the project.

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Problems with the requirements include:

  • Equipment rental is an extremely competitive industry with an absolute premium placed on fast service. Turnaround time is measured in hours. Orders are usually placed by owner or employee by cell phone as they are driving between jobsites, to Lessor’s sales rep also driving between jobsites.   Customers almost never actually visit the Lessor’s location. Getting a contract signed, returned to the office, and back out the door to the owner or GC in ten days is usually an impossible challenge. This is especially true with high volume customers with multiple jobsites, and in the late stages of a job.
  • The types, numbers, and duration of equipment on rent change as the job progresses. A machine may be on rent for a few days or a week or two, called off, and back on rent a week or two later as need arises. Machines can be swapped out under the same contract should they break or when needs change. A 10 day notice is required for each instance, and every machine, causing useless chatter Owners & GCs neither need nor want.
  • Very often a sub-contractor or employee doesn’t know the legal owner or description of a job, or if they do they don’t know the owner’s address. Getting correct information often takes days and help from outside service companies to track down information in Dodge, legal records, or multiple phone calls. This is a real difficulty when there is no formal written contract or recording of the project.
  • Customers are very hesitant to cooperate in any process which will reveal details of their private negotiations with their vendors to their customers, particularly at the very beginning of a job. This is not a requirement of any other material or labor supplier, so why rental?
  • Most payment issues don’t manifest themselves until the mid to later stages of a project, and certainly not in the first ten days. So by the time the Lessor uncovers issues on a normally good customer or project, they’ve already lost rights.
  • In some cases, the lessor may not know a machine has been moved to a new job by the lessee for several days and new contracts are not always generated for each new jobsite.

Of the 47 States that offer some form of Materialmen’s Lien Statute, only four single out Lessors of Movables for special Attention.[2] The vast majority of States have concluded there is no evidence Rental Equipment Companies are more likely to file disputed or fraudulent lien claims than any other class of supplier and thus should be afforded the same rights under the same requirements as other suppliers. Any assumption to the contrary is simply anecdotal prejudice.

There are very good arguments to be made for adopting a pre-work notice as opposed to a post work notice. And in fact, 39 States have just such a preliminary notice program as opposed to only eight relying solely on post-problem notices. However, such requirements need to be fair, reasonable, and apply to all types of material & labor supplier. To single out one class of supplier, having no evidence of wrong doing or need, and subject them to unreasonably tight and intrusive mandates is an unjust and disparate burden.

View the proposed changes to the Louisiana Private Works Act (i.e. Louisiana’s mechanics lien law) submitted by Kurt Sorensen, Corporate Credit Director for H&E Equipment, to offset the disproportional requirements placed upon equipment rental companies.  Download:  Proposed Changes

Footnotes

[1] Also Public Works Act LSA-R.S. 38:2242 (C) (1)

[2] North Dakota, Missouri, Delaware, and Louisiana give Lessors of Movables special requirements and/or reduced rights within the statutes. Two other States, New Hampshire and Illinois, have some case law making it unclear. Arkansas resolved their ambiguity just last year in a State Supreme Court case granting equal status with other suppliers (Ahern v Salter, 2014).

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Louisiana Lessors Have Disparate Burden To Use Lien Rights
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Louisiana Lessors Have Disparate Burden To Use Lien Rights
Description
Louisiana should change their lien laws to stop discriminating against equipment rental companies, argued by H&E Equipment's Corporate Credit Manager.
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zlien
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