Late last year, The Construction Payment Blog noted that sweeping change may have been headed for Mississippi’s Stop Notice Law, and it looks like that change may have started to occur.
Current State of Mississippi Lien or Stop Notice Protection
a decision from the 5th Circuit Court of Appeals set the groundwork for some significant changes to the Mississippi stop notice scheme In Mississippi, only an original contractor (a party who contracted directly with the property owner) has lien rights, and a party who did not contract directly with the property owner is unable to file a mechanics lien against the property. Instead, parties that contracted with the general contractor may deliver a “Stop Notice” to effectively “lien” the funds not yet paid to the general contractor by the property owner. Parties who did not contract with either the property owner or the general contractor are not protected in Mississippi.
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In October 2013, a decision from the 5th Circuit Court of Appeals set the groundwork for some significant changes to the Mississippi stop notice scheme. In Noatex Corp. v. King Constr. of Houston, 2013 U.S. App. LEXIS 20656 (5th Cir. 2013), the court determined that the Mississippi stop notice law was facially unconstitutional, as it deprived general contractors of their property without due process of law.
Potential Changes Afoot to Mississippi Lien Law?
Drastic potential changes to the Mississippi lien scheme are currently making their way through the Mississippi legislature, as we contemplated they might back in October. Senate Bill 2622 provides sweeping changes to the structure of mechanics liens in Mississippi.
If ultimately adopted into law, Senate Bill 2622 would pattern the new Mississippi mechanics lien law on that of Georgia. If ultimately adopted into law, Senate Bill 2622 would pattern the new Mississippi mechanics lien law on that of Georgia. No longer would subcontractors be limited to stop notices for satisfaction of claims for payment, and sub-subs wouldn’t be excluded from protection. This is big news, and would completely upturn the lien landscape in Mississippi, in my opinion, for the better. Mississippi had previously been unique in its disdain for any expansion of the protection of the mechanics lien instrument to subcontractors and sub-subs. This is a needed change that would bring Mississippi much more in line with the generally accepted protections of mechanics liens in other states, and could lead to a growth of the construction industry in that state. The language of the bill can be read here.
Tracking the Progress
Senate Bill 2622 was drafted in January, amended and passed as amended on February 12, and transmitted to the Mississippi House on February 17, 2014. A similar bill that was originally introduced in the house died in committee earlier this month, so it will be interesting to see how the Senate amended bill fares. It is time for Mississippi to expand the rights provided by mechanics liens to more parties than just general contractors, and to come closer in line with the view of every other state. This potential change to Mississippi law has the ability to completely reinvent the structure of security on construction projects in Mississippi, and set the stage for growth in the construction industry. The Construction Payment Blog will be tracking the potential amendments to Mississippi’s law as it happens.