The recent dramatic changes to Mississippi’s lien law scheme completely changed the landscape of construction security in Mississippi. Mechanics liens are now available to subcontractors, sub-subcontractors, and suppliers instead of only to original contractors. In order to benefit from those new-found lien rights, however, some parties may be required to send one or more of the newly created notices (whether traditional preliminary notice or notice of intent to lien). The changes do not stop there, however, the new statute is a complete reinvention of the entire construction security universe in Mississippi. Because of this, there were also big changes related to the treatment and structure of Mississippi lien waivers.
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Mississippi Lien Waiver Law Sheds Some Ambiguity
“A right to claim a lien or to claim upon a bond may not be waived in advance of furnishing of labor, services or materials.” In most states, an attempt to strip subcontractors and suppliers of lien rights at the beginning of a project – through “no lien clauses” or requiring a pre-work lien waiver – is unenforceable. However, along with a small number of states in which the process is allowed, there is a decent number of states in which the law is silent on the matter. As a practical matter, most of the states that don’t directly address this issue by statute still disfavor the practice and do not enforce attempts to strip lien rights prior to a project beginning, but the lack of direct “black letter” law on the subject can, and should, make one uneasy when confronted with a pre-work lien waiver. Lien waivers work like receipts for payment – once a lien waiver is given it provides some evidence that the payment was made.
Mississippi used to be one of the states in which the law was silent on this issue. Now, however, Mississippi law clearly states a position, and it’s a good one for potential lien claimants. New Section 85-7-419 of the Mississippi Code states the following:
A right to claim a lien or to claim upon a bond may not be waived in advance of furnishing of labor, services or materials. Any purported waiver or release of lien, bond claim or this article executed or made in advance of furnishing labor, services or materials is null, void and unenforceable.
This is a strong statement protecting the rights of parties in the construction industry and codifies Mississippi’s disfavor of the practice.
New Mississippi Lien Waiver Scheme
Prior to these new changes to the lien law, Mississippi didn’t have a statutory lien waiver form – lien waivers had no specifically required formal appearance or language. Now, however, the statute specifically sets out the accepted form and language for each of the two lien waivers contemplated by the statute. These forms can be found at 85-7-433(1) for the “Interim Waiver and Release Upon Payment” and 85-7-433(2) for the “Waiver and Release Upon Final Payment”. It is important to note that a lien waiver must “substantially follow” the form set out by statute in order to be valid, however, the failure to correctly complete any of the blank spaces in the form does not automatically invalidate the form if the “subject matter of the release reasonably may be determined”.
“The amounts noted on the waiver are deemed to have been paid in full upon the earliest of 1) actual receipt of the funds; 2) execution by the claimant of a separate written acknowledgment of payment in full; or 3) 60 days after the execution of he waiver – unless the claimant files and delivers an affidavit of non-payment to suspend the waiver.” You may note that, in the two waivers referenced above, there is no mention of whether the waiver is conditional or unconditional. This is because the new approach for lien waivers in Mississippi mandates that the waivers work in a very specific way. The waivers can be thought of in two different ways: 1) As a conditional waiver that turns into an unconditional waiver upon some condition being met; or 2) An unconditional waiver that may be suspended prior to a certain date. While the second definition is technically more precise, either option provides the right idea as to how the new Mississippi lien waivers work.
Once a waiver is signed it is binding against the claimant, subject to full payment of the amount set forth in the waiver and release. The amounts noted on the waiver are deemed to have been paid in full upon the earliest of 1) actual receipt of the funds; 2) execution by the claimant of a separate written acknowledgment of payment in full; or 3) 60 days after the execution of he waiver – unless the claimant files and delivers an affidavit of non-payment to suspend the waiver.
It is important to note that the waiver will be deemed final and binding even as to amounts never received if 60 days pass from its execution without the filing of an affidavit of non-payment. The affidavit of non-payment can work to suspend this deadline until payment is received, but only if the specific requirements are met, and the specific form and wording is used.
While it may not be the first thing anybody talks about when discussing the recent changes to Mississippi’s lien law, the changes to the lien waiver scheme are important, as well.