HOW TO FILE AN ALABAMA MECHANICS LIEN (Alabama Mechanics Lien and Notice Requirement Overview)
Mechanics liens are a crucial component of the construction payment ecosystem, and a powerful tool to make sure construction companies get paid what they deserve. However, the requirements surrounding mechanics liens and notices are complex and confusing. This guide sets out and simplifies the rule.
WHO CAN FILE?There are two types of liens in Alabama: a Full Price lien and an Unpaid Balance lien. Full Price liens are available to prime contractors, any other party in direct contract with the owner, or a material provider who has previously delivered a Notice to Owner (Preliminary Notice) to the property owner before the delivery of materials. This Notice may be disputed by the owner.
For those remaining parties, an Unpaid Balance lien is available after a Notice of Unpaid Lien has been delivered to the property owner. The specifics on these documents and timetables are below.
Those who did not contract with the property owner directly are required to deliver a Notice of Unpaid Lien to the property owner before filing a mechanics lien. Delivery of this notice puts the owner on notice that a lien is claimed, and requires the owner to withhold funds sufficient to satisfy your claim. The earlier it is sent, the more likely it is to be received before the owner disburses those funds to the prime contractor, and before the claimant loses any rights thereto.
According to Alabama law, there is no licensing requirement for a person otherwise entitled to a mechanics lien to assert those lien rights.
The below provides an overview of the notice and lien requirements and formalities in Alabama, but additional information, including information related to lien waivers, prompt payment statutes, retainage, construction payment in general, and Alabama public projects, can be found here: http://www.zlien.com/alabama-construction-payment-resources/
SENDING NOTICE TO OWNER (Preliminary Notice)Prime Contractor
Those who contract directly with an owner do not need to send a Notice to Owner.
Subcontractors and Suppliers
For parties not contracting directly with the property owner, sending preliminary notice in Alabama results in greater lien protection. Those who do not send a preliminary notice in Alabama are entitled to later file a mechanics lien for the unpaid balance amount on the project. Those who had properly and timely delivered a preliminary notice are entitled to file a Full Price Lien. Anyone who furnishes material (material suppliers certainly, but ambiguous as to whether subcontractors who also supply materials must comply), and who are not contracting directly with the owner, should deliver a Notice to Owner prior to delivering any materials. Doing so entitles the party to a Full Price Lien rather than the usual Unpaid Balance Lien. Regardless of whether a Notice to Owner is or is not delivered, prior to filing a Statement of Lien (i.e. the mechanics lien), anyone who is not in direct contract with the owner must deliver a Notice of Unpaid Lien to the property owner.
Full Price Lien vs. Unpaid Balance Lien
Full Price liens can be filed at any time before the mechanics lien filing deadline (as long as Notice to Owner was delivered before the outset of work). When filed, a Full Price lien secures the entire debt against the project.
Unpaid Balance liens, however, only secure the amount of money that the property owner has not yet paid the general contractor at the time of filing. For example, a sub or supplier is owed $5,000 but the property owner has paid the general contractor in full, the unpaid sub or supplier ends up empty handed.
Timing of Notice to Owner
Notice to Owner must be sent before any furnishing whatsoever to preserve rights to a Full Price Lien. There is some ambiguity about whether a supplier must deliver the notice before every material delivery, or before the first one only, or before any material delivery where protection is desired.
Content of Notice
The Notice to Owner should include the name and address of the property owner, a description of materials being provided, the amount owed, and the property where materials are being delivered. Along with their name and address, a party must also include the party who hired them.
Who Must Receive the Notice?
This will change depending on your place in the contracting chain. The best practice is to send notice to everyone above you on the contracting chain, even if only a selection of parties is required. In Alabama, the notice is to be sent to the property owner, or his agent.
How to Send the Notice
In Alabama, the property owner must have actual notice. Notice should be sent certified mail return receipt to show the owner actually received notice.
When is Notice Effective?
Not specified, but requirement of "actual" notice seems to point to effectiveness hinging on actual receipt.
FILING A MECHANICS LIENNotice of Unpaid Lien
As mentioned above, those not directly in contract with an owner must first deliver a Notice of Unpaid Lien to the property owner before a mechanics lien can be filed. The earlier this is sent, the better.
This form should include a mailing address of the party providing labor or materials, the address where materials or labor were delivered, a description of services and/or materials provided, and the total amount owed to the notifying party.
Contents of Alabama Mechanics LienAn Alabama mechanics lien must include the name and address of a claimant, the name and address of the property owner, a description of the property (which we will discuss in detail below), the party who hired claimant, and a description of services, labor, materials, equipment, and/or work provided by the claimant.
Alabama statute ? 35-11-213 sets forth the standard acceptable form and contents of an Alabama mechanics lien. Accordingly, a lien document in following form is deemed sufficient:
State of Alabama,
County of _____________________
____________________________ files this statement in writing, verified by the oath of ____________________, who has personal knowledge of the facts herein set forth:
That said _______________ claims a lien upon the following property, situated in _____________ County, Alabama, to wit:
This lien is claimed, separately and severally, as to both the buildings and improvements thereon, and the said land.
That said lien is claimed to secure an indebtedness of _____________ with interest, from to wit _____________ day of _____________, 20_____________, for _____________
The name of the owner or proprietor of the said property is _____________
Before me, _____________, a notary public in and for the county of _____________, State of _____________, personally appeared _____________, who being duly sworn, doth depose and say: That he has personal knowledge of the facts set forth in the foregoing statement of lien, and that the same are true and correct to the best of his knowledge and belief.
Subscribed and sworn to before me on this the _____________ day of _____________, 20_____________, by said affiant.
Deadline to FileThe deadline to file an Alabama mechanics lien is dependent upon the status of the lien claimant, and contingent upon first providing notice to the property owner. After providing notice to the owner, the deadline to file a lien varies.
Laborers must file within 30 days of date labor was last provided; Original contractors must file within 6 months after the last item of work or labor has been performed; And all other claimants must file within 4 months after work or materials were last provided.
Where to FileIn Alabama, a mechanics lien is to be filed "in the office of the judge of probate of the county in which the property upon which the lien is sought to be established is situated."
AmountsAs mentioned above, the amount that can be included in a lien depends on project role and, to some extent, whether Notice to Owner was given. Alabama law does not allow for the recovery of attorney's fees or other miscellaneous amounts in a mechanics lien.
Deadline to Enforce LienAlabama law requires that a mechanics lien be enforced within 6 months from the date the entire amount became due. If this 6-month period passes without an action being filed to enforce the lien, the lien expires. This period is the same time period in which a prime contractor's lien must be filed.
Property DescriptionWhile Alabama does not require a legal property description, a description by which the property to be liened can be located or identified is required. If the property is located in a city or town, a description by house number, name of street, and name of city or town is sufficient. If the property being liened is not located within a city or town, the lien also may extend to one acre in addition to the land upon which the improvement is situated. If no accurate description of this additional one acre can be reasonably obtained by the lien claimant, it may be sufficiently described as "one acre of land surrounding and contiguous" to the building.
NotarizationAn Alabama mechanics lien must be notarized.
Special Considerations for CondominiumsYou may file a lien against an individual condominium in Alabama, provided you are a party allowed to file a mechanics lien, but cannot file a lien against the condominium property as a whole subsequent to the recording of the condominium declaration. However, performing work on the common elements - if authorized by the condominium association - is deemed to have been performed or furnished with the express consent of each owner benefitted, and a lien can be filed against each unit individually.
CONCLUSIONA mechanics lien can be a powerful tool to get paid on construction projects. But, the efficacy of the tool is dependent on the lien being valid. Following the necessary notice requirements and procedures from the beginning of the project, and following the lien filing rules in order to make sure the lien is valid greatly increase a lien's ability to result in payment.
A potential lien claimant should make sure to give careful attention to the requirements if filing themselves, utilize software products to manage lien rights as an intermediate step, or obtain assistance from attorneys if they need legal guidance or assistance.