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ARKANSAS
Tuesday, June 17, 2008
Basically, most persons involved with the project will have lien rights. A subcontractor is defined as one with a contract with the contractor or a person with a contract with someone who has a direct contract with the contractor. This means that the subcontractor to a subcontractor would have lien rights, but anyone farther down the line is not covered.
In 1995 the Arkansas legislature made changes in the state's lien laws. However, much of the old statute and old case law remain. The right of a materialman to a lien is wholly dependent on the statute and its provisions. Enforcement of the materialman's lien will still require proof that the goods or services were delivered and incorporated into the improvement. The burden is placed on the person claiming a lien to show the actual use of the goods or work. The law has not been altered concerning the matter of profits and the merchant is permitted to obtain the retail price for goods that include an element of profit. Ten days notice prior to filing the lien still applies to all but general contractors. The statement of account still must be filed with the circuit court in the proper county within 120 days after the material has been furnished or the work performed. The statement is a just and true account of the demand due or owed after all credits.
Liens have equal priority over each other without regard to the date of filing the account or lien or the date when the particular labor or material was performed or furnished. All such liens shall date from the time that the construction or repair first commences.
Notice of the right to claim a lien may be "incorporated into the contract, or affixed thereto, and shall be conspicuous ..." The notice then may be placed in the contract. A prudent person should still state the statutory notice in all capitals with a separate signature.
No material supplier or laborer shall be entitled to a lien unless the material supplier or laborer notifies the owner of the commercial real estate being improved, in writing, that such material supplier or laborer is currently entitled to payment but has not been paid. This notice shall be sent to the owner and to the contractor by registered mail, return receipt requested, before 75 days have elapsed from the time that the labor was supplied or the material furnished. The notice must contain: 1. a general description of the labor, service or material furnished and the amount due and unpaid; 2. the name and address of the person furnishing the labor, service or materials; 3. the name of the person who contracted for purchase of the labor, service or materials; 4. a description of the job site sufficient for identification; 5. a particular notice listed in the appendix must be set out in boldface type.
Preconstruction notice must be give in order to safeguard lien rights. Previously, subcontractors and suppliers have been at the mercy of the prime contractor for this notice. Since the prime contractor did not previously need the notice to perfect its own rights, there was little incentive to give the notice. A subcontractor or supplier now has the right to demand the prime contractor provide a certificate that the owner has received the preliminary notice.
If work commences on a project before the filing of the construction money mortgage, then the lender's priority is lost. The result could be the loss of a project if a lender refuses to issue the construction financing because there is a question concerning whether construction site activity is commencement. The new law defines commencement as: 1. delivery of a significant amount of building material to the site; 2. grading or excavating the site; 3. laying out lines or grade stakes; 4. demolition in an existing structure.