Individual state legislatures sometimes can go decades without amending their states’ lien laws. Unfortunately, this can make it easy to overlook potential changes when they do come about – and over the whole country lien law is constantly evolving. For example, the PAID blog recently discussed how Illinois just amended its law to restore mechanics liens priority over other debts on the property, such as mortgages. This amendment was a major change and clarification to state law. Now, Oklahoma mechanics lien law may be changing.
Proposed Oklahoma Lien Law Would Grant Extra Protections
The proposed law in Oklahoma only adds three pieces of text to the statute, but these changes could actually have a major effect on what protections subcontractors receive after a mechanics lien is filed.
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For example, let’s say that an Tulsa plumber is hired all the bathroom fixtures in a property. Although the plumber completed her work on time and skillfully, the property owner refuses to pay her. Knowing that filing a mechanics lien can help her get paid, she files one. But what exactly is the plumber entitled to under Oklahoma law?
Currently, Oklahoma law only permits unpaid subcontractors and supplier to recover the “amount due.” Apparently, either the courts or the legislature found that phrase sufficiently unclear. Does “amount due” mean that subcontractors and suppliers are entitled to recover the cost of the materials they supplied to the contract? Should the courts set a value on how much their work was worth? Or should the legislature clarify that “amount due” not only means the market value of the subcontractor’s work but also profit and overhead costs to which the subcontractor is entitled?
The New Oklahoma Lien Law Would Protect Subcontractor’s Profits
The law that is currently working itself through the Oklahoma legislature opts for the third choice. Instead of merely being able to recover any “amount due” to a subcontractor or supplier, a subcontractor or supplier would also be entitled to “any applicable profit and overhead costs due to the person.”
“a subcontractor or supplier would also be entitled to “any applicable profit and overhead costs due to the person.”
The proposed law’s intent to protect any profits a subcontractor would have made is crystal clear; the phrase “any applicable profit” would appear three times in the new law.
Why the Change?
While the cases I will discuss are more than 40 years old, it is possible that the Oklahoma legislature is considering these amendments in response to courts denying lien claimants any profits or lost profits they would have made on a project.
For example, in Flour Mills of America v. American Steel Building Co., the Supreme Court of Oklahoma ruled that it would not even consider whether a lien claimant was entitled to any profits he would have made on a project for which he was not paid. Similarly, in Polk v. Bartlett, the Supreme Court of Oklahoma also held that a subcontractor was not entitled to 10% profits he asserted in a lien unless the subcontractor was able to show he complied with additional requirements.
Perhaps, however, the proposed law is the result of years of lobbying and legislative advocacy by the construction industry. Clearly, it would be in the best of interests of subcontractors and suppliers if the statute made crystal clear that unpaid invoices could also include any profits the subcontractor would have earned
it would be in the best of interests of subcontractors and suppliers if the statute made crystal clear that unpaid invoices could also include any profits the subcontractor would have earnedhad he or she been paid.
Will the Proposed Law Pass?
While it’s not clear if the proposed law will ever go into effect, it does appear to be picking up steam. The bill has three sponsors and passed the house in an overwhelming 78-11 vote on March 6, 2013. The bill even passed the House judiciary committee with flying colors in a 9-3 vote on February 19, 2013.
It’s of course no guarantee that the bill will pass the Senate and gain the governor’s signature, but with such strong support in the House, it shouldn’t be too surprising if changes soon occur in Oklahoma lien law.