Lien laws can change drastically — Make sure your procedures change with them
Thursday, April 13, 2017
Mechanics lien rules and requirements are complex and demand strict compliance. With the high stakes associated with providing proper notice and protecting lien rights, it would be nice to be able to assume the laws remain relatively constant.
Unfortunately, however, lien laws are not static. While most changes are relatively minor — in that the change only modifies a single requirement (or a small handful) — there is the real possibility that a state's entire lien law scheme can be altered. When this type of wholesale change occurs, anybody left unaware can be left scrambling to catch up, or just left unprotected.
State legislatures can change lien law
Generally, lien law changes occur gradually and in a piecemeal fashion — a change to a deadline here, a new notice requirement there — and before you know it, the old procedures don't work as well as they should. Occasionally, though, a state legislature completely overhauls the lien law scheme, and a company's policies and procedures for protecting lien rights can be rendered ineffective overnight.
For example, in the past five years, in addition to the myriad small changes to dot the lien law landscape, both North Carolina and Mississippi have drastically modified their notice and lien requirements on a fundamental level. Changes of this magnitude can be difficult for companies doing business in multiple states, as they may not be quite as in tune with proposed changes to the law in states other than where they are headquartered or do the majority of their business.
Even though it may be difficult, however, it is important to remain vigilant in keeping abreast of proposed changes and their effective date. If the proposed change is large enough, a plan to modify notice policy in the appropriate state should be implemented so that the change is seamless.
Making sure the changes are considered by the applicable notice policy can go a long way toward remaining secure on every project, and not having an "oops" moment when it's realized a large invoice is unprotected.
Any changes currently in the works?
The doom-and-gloom scenario outlined above may have sparked a question as to whether there are any similar significant changes currently contemplated. And, it just so happens that there are.
While nothing has yet passed, Texas is currently considering a comprehensive overhaul to its notoriously complex notice and lien structure that would completely alter the practices of any party furnishing labor or material in that state.
While the proposed Texas changes are too numerous and widespread to discuss fully here, if passed, the "monthly" notices that have become synonymous with the headaches caused by Texas notice requirements will become a thing of the past. They will, however, be replaced with different notice requirements.
What can be done to stay informed?
Other than meticulously following the proposed legislative changes in every state in which a company does business, or following construction legal blogs in those states individually, there have historically been few options to keep informed of changes and potential changes to lien law and lien law interpretation. However, there are some blogs and resources that cover lien law, and changes thereto, on a national level, and can provide an all-in-one solution to staying on top of changes and proposed changes.
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