HOW TO FILE AN ARKANSAS MECHANICS LIEN (Arkansas 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 rules
Who Can File?You are qualified to file a mechanics lien in Arkansas if you are a contractor, subcontractor, or material supplier, who supplies labor, material fixtures, engines, boilers, or machinery in the construction or repair. Also, Arkansas law provides mechanics lien rights to architects, engineers, surveyor, appraiser, abstractor, title insurance agent, or person providing landscaping services or supplies if under a written contract with the owner or owner's agent.
It is important to note one unique aspects of Arkansas' mechanics lien laws which can impact a party's qualification for filing.
The right to file a mechanics lien in Arkansas requires an "enforceable contract." This doesn't necessarily mean the contract must be written, it just needs to be enforceable. There are some practical problems with oral contracts that may jeopardize their enforceability.
According to Arkansas law, there is no licensing requirement for a person otherwise entitled to a mechanics lien to assert those lien rights.
NOTICE TO OWNER (Preliminary Notice)In Arkansas, residential real estate refers to the real estate of dwellings containing four or fewer units. Commercial real estate refers to real estate not including dwellings, or real estate that would otherwise be considered residential that contains 5 or more units.
I. Notice to Owner by Contractor (Residential Projects)On a residential project, a contractor is required to provide a Pre-Construction Notice to Owner prior to starting work. While the general contractor's notice to owner works to the benefit of the subcontractors and material suppliers, his failure to give the required notice affects their lien rights. It is prudent for subcontractors and material suppliers to provide their own Pre-Construction Notice to Owner to safeguard their lien rights. This notice does not need to be filed with a clerk of court.
(Separate from the above notice requirements, a potential lien claimant must provide the property owner with a Notice of Intent to Lien.)
Who Must Receive This Notice
The owner, owner's authorized agent, or owner's registered agent must receive the Pre-Construction Notice to Owner.
Timing of Notice
For residential projects, the Pre-Construction Notice to Owner must be given prior to beginning work.
When is Notice Effective?
Notice is effective with the signature of the owner of the residential real estate, the owner's authorized agent, or the owner's registered agent. In an instance when the notice is delivered by certified mail, signature is not necessary.
Content of Residential NoticeThe notice subsection may be incorporated into the contract or affixed to the contract and shall be conspicuous, set out in boldface type, worded exactly as stated in all capital letters, and shall read as follows:
"IMPORTANT NOTICE TO OWNER
I UNDERSTAND THAT EACH CONTRACTOR, SUBCONTRACTOR, LABORER, SUPPLIER, ARCHITECT, ENGINEER, SURVEYOR, APPRAISER, LANDSCAPER, ABSTRACTOR, OR TITLE INSURANCE AGENT SUPPLYING LABOR, SERVICES, MATERIAL, OR FIXTURES IS ENTITLED TO A LIEN AGAINST THE PROPERTY IF NOT PAID IN FULL FOR THE LABOR, SERVICES, MATERIALS, OR FIXTURES USED TO IMPROVE, CONSTRUCT, OR INSURE OR EXAMINE TITLE TO THE PROPERTY EVEN THOUGH THE FULL CONTRACT PRICE MAY HAVE BEEN PAID TO THE CONTRACTOR. I REALIZE THAT THIS LIEN CAN BE ENFORCED BY THE SALE OF THE PROPERTY IF NECESSARY. I AM ALSO AWARE THAT PAYMENT MAY BE WITHHELD TO THE CONTRACTOR IN THE AMOUNT OF THE COST OF ANY SERVICES, FIXTURES, MATERIALS, OR LABOR NOT PAID FOR. I KNOW THAT IT IS ADVISABLE TO, AND I MAY, REQUIRE THE CONTRACTOR TO FURNISH TO ME A TRUE AND CORRECT FULL LIST OF ALL SUPPLIERS AND SERVICE PROVIDERS UNDER THE CONTRACT, AND I MAY CHECK WITH THEM TO DETERMINE IF ALL MATERIALS, LABOR, FIXTURES, AND SERVICES FURNISHED FOR THE PROPERTY HAVE BEEN PAID FOR. I MAY ALSO REQUIRE THE CONTRACTOR TO PRESENT LIEN WAIVERS BY ALL SUPPLIERS AND SERVICE PROVIDERS, STATING THAT THEY HAVE BEEN PAID IN FULL FOR SUPPLIES AND SERVICES PROVIDED UNDER THE CONTRACT, BEFORE I PAY THE CONTRACTOR IN FULL. IF A SUPPLIER OR OTHER SERVICE PROVIDER HAS NOT BEEN PAID, I MAY PAY THE SUPPLIER OR OTHER SERVICE PROVIDER AND CONTRACTOR WITH A CHECK MADE PAYABLE TO THEM JOINTLY.
ADDRESS OF PROPERTY _________________________
I HEREBY CERTIFY THAT THE SIGNATURE ABOVE IS THAT OF THE OWNER, REGISTERED AGENT OF THE OWNER, OR AUTHORIZED AGENT OF THE OWNER OF THE PROPERTY AT THE ADDRESS SET OUT ABOVE.
II. Notice to Owner and Contractor (Commercial Projects)Because supplying the Notice to Owner by Contractor (Residential Projects) imposes a substantial burden on laborers, subcontractors, service providers, and material suppliers, those notice requirements only apply to construction of or improvement to residential real estate containing four (4) or fewer units.
No subcontractor, service provider, material supplier, or laborer shall be entitled to a lien upon commercial real estate unless the subcontractor, service provider, material supplier, or laborer notifies the owner of the commercial real estate being constructed or improved, the owner's authorized agent, or the owner's registered agent in writing that the subcontractor, service provider, material supplier, or laborer is currently entitled to payment but has not been paid.
Commercial Notice RequirementsWho Must Receive the Notice?
The owner, owner's authorized agent, or the owner's registered agent must receive notice.
Timing of Notice
The notice shall be sent to the owner, the owner's authorized agent, or the owner's registered agent and to the contractor before seventy-five (75) days have elapsed from the time that the labor was supplied or the materials furnished.
Content of Notice
The notice shall contain the following information:
A. A general description of the labor, service, or materials furnished, and the amount due and unpaid;
B. The name and address of the person furnishing the labor, service, or materials;
C. The name of the person who contracted for purchase of the labor, service, or materials;
D. A description of the job site sufficient for identification; and
E. The following statement set out in boldface type and all capital letters:
"NOTICE TO PROPERTY OWNER
IF BILLS FOR LABOR, SERVICES, OR MATERIALS USED TO CONSTRUCT OR PROVIDE SERVICES FOR AN IMPROVEMENT TO REAL ESTATE ARE NOT PAID IN FULL, A CONSTRUCTION LIEN MAY BE PLACED AGAINST THE PROPERTY. THIS COULD RESULT IN THE LOSS, THROUGH FORECLOSURE PROCEEDINGS, OF ALL OR PART OF YOUR REAL ESTATE BEING IMPROVED. THIS MAY OCCUR EVEN THOUGH YOU HAVE PAID YOUR CONTRACTOR IN FULL. YOU MAY WISH TO PROTECT YOURSELF AGAINST THIS CONSEQUENCE BY PAYING THE ABOVE NAMED PROVIDER OF LABOR, SERVICES, OR MATERIALS DIRECTLY, OR MAKING YOUR CHECK PAYABLE TO THE ABOVE NAMED PROVIDER AND CONTRACTOR JOINTLY."
How to Send the Notice
The notice may be served by any:
I. Officer authorized by law to serve process in civil actions;
II. Form of mail served with a return receipt requested and delivery restricted to the addressee or the agent of the addressee; or
III. Means that provides written, third-party verification of delivery at any place where the owner, the owner's registered agent, or the owner's authorized agent maintains an office, conducts business, or resides.
When is Notice Effective?
When served by mail, the notice shall be complete when mailed.
III. Notice of Intent to LienIn addition to the above notice requirements, Arkansas also has a Notice of Intent to Lien requirement as set forth below:
Every person who may wish to avail himself or herself of the benefit of the provisions of this subchapter shall give ten (10) days' notice before the filing of the lien, as required in ? 18-44-117(a), to the owner of a building or improvement that he or she holds a claim against the building or improvement, setting forth the amount and from whom it is due.
How to Send the Notice
The notice may be served by any:
I. Officer authorized by law;
II. Person who would be a competent witness;
III. Certified mail with return receipt requested and delivery restricted to the addressee or the agent of the addressee; or
IV. Means that provides written, third-party verification of delivery at any place where the owner of the building or improvement maintains an office, conducts business, or resides.
When served by an officer, his or her official return endorsed on the notice shall be proof of the service. When served by any other person, the fact of the service shall be verified by affidavit of the person serving the notice.
When served by mail, the service shall be complete when mailed and verified by a return receipt signed by the addressee or the agent of the addressee, or a returned envelope, postal document, or affidavit by a postal employee reciting or showing refusal of the notice by the addressee or that the item was unclaimed.
If delivery of the mailed notice is refused by the addressee or the item is unclaimed, the lien claimant shall immediately send the owner of the building or improvement a copy of the notice by first class mail and may proceed to file his or her lien. The unopened original of the item marked unclaimed or refused by the United States Postal Service shall be accepted as proof of service as of the postmarked date of the item.
FILING A MECHANICS LIENContents of Arkansas Mechanics Lien
A claimant must file a just and true account of the demand. This lien account shall contain a correct description of the property to be charged with the lien, verified by affidavit. An affidavit of notice must be attached to the demand, and the affidavit shall contain a sworn statement evidencing compliance with applicable notice provisions and a copy of each of the notices. A lien account that does not contain the required affidavits and attachments will not be filed by the clerk of court.
Deadline to File
An Arkansas mechanics lien must be filed within 120 days of the last "substantial" work on the project. It should be noted, however, that a lien cannot be filed until 10 days after the Notice of Intent to Lien has been filed. So a claimant must be sure that a Notice of Intent to Lien is filed 110 days after the last substantial work on the project at the latest. Otherwise, their lien cannot be timely filed within 120 days.
Arkansas law allows for a broad recovery through a mechanics lien. Amounts that may be recovered include the debt, interest, and costs. Attorney's fees may also be awarded. However, these amounts are awarded by the court in an enforcement action - and are allowed by the court whether or not the lien creditor included those amounts in the lien. It may, therefore, be advisable to not include any extraneous amounts, to be cautious, as they may be awarded by the court in a successful enforcement action.
Further, Arkansas law restricts a claimant's ability to claim "profits" in its mechanics lien claim. The general rule is that profits may not be included in a lien claim, and therefore, only the true costs of the labor, materials, services or work furnished can be claimed. There is a single exception allowing profits when the parties have a fixed-price contract and the work of the entire contract is completed.
Deadline to Enforce Lien
Arkansas law requires that a mechanics lien be enforced within 15 months of the date the lien was recorded.
An Arkansas mechanics lien requires a "correct description of the property to be charged with the lien, verified by affidavit." This does not require a legal description of the property, a description is sufficient if it describes the property to be liened such that it can be reasonably identified.
A mechanics lien in Arkansas must be notarized to be valid.
Notice of Recordation
After filing, notice of the lien should be mailed to the property owner by registered mail. If the lien amount is not fully paid within 20 days of the date of mailing this notice, attorney's fees may be awarded in an action to enforce the lien.
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.