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TENNESSEE
Tuesday, June 17, 2008
The most important legal concept related to the mechanics' lien statute is that it is strictly construed. This is important because numerous Tennessee cases have held that a lien claimant has no lien if the claimant makes even a minor mistake in filing this notice of lien, etc. A single misstep can be fatal to the mechanics' lien.
The lien attaches only to whatever interest the owner has in the land. Thus, if an owner is leasing land under a lease which does not require the owner to make improvements to the property, the lien may only be asserted against the leasehold interest, not the ownership interest of the lessor.
A mechanics' lien may not be asserted against public lands and/or projects.
There must be an agreement to improve the real property, written or unwritten, express or implied. This contract includes "extras," which are defined by the statute to mean "labor performed or materials furnished for improving real property, authorized by the owner and not included in previous contracts." it thus appears that a lien may be asserted on additional work done or materials supplied beyond those required under the original contract so long as the owner has authorized the additional work or materials.
Because the liens created under the statute attach at the same time, the lienors share pro rata when the liens are settled. However, the liens of laborers have preference over all other liens created by the mechanics' lien statute.
Obligatory advances for commercial purposes will be superior to an intervening lien only if the mortgage contains a statement giving notice that it secures obligatory advances and that it is for commercial purposes. An optional advance will be prior to an intervening lien only if the mortgagee has to actual notice of the intervening lien prior to making the advance.
A contractor who contracts directly with the owner need not give any formal notice to the owner in order to preserve his lien rights against the owner. A contractor who contracts directly with the owner has this lien for a period of one years after the work is finished or materials were supplied. The contractor who contracts directly with the owner must therefore bring suit to enforce the lien within this one-year period.
Although the contractor who contracts directly with the owner need not give formal notice to the owner, if the contractor desires to "preserve the virtue of the lien" as against someone who purchases or takes an interest in the owner's land without notice of the lien (a bona fide purchaser), then the contractor must take one of two specific actions. The most popular of those actions is for the contractor to file a sworn statement of the amount due and a reasonably certain description of the land within 90 days after the project is completed or within 90 days from the contractor's last work on the project. A "reasonably certain" description of the land is a complete legal description. Anything less than a complete legal description is apt to raise some question as to whether it is "reasonably certain."
The contractor without a direct contract with the owner must give two separate and distinct notices (although there is no reason why they cannot be done in the same document, if within the proper time period) to the owner and the contractor.
Within 60 days of the last day of the month in which work was performed or materials were furnished, the contractor must send a notice of nonpayment to the owner and the contractor who has a contract with the owner. The notice of nonpayment must contain all of the following information: The name and address of the contractor sending the notice of nonpayment; a general description of the work, services or materials provided; a statement of the last date the contractor performed work or furnished materials; and a description "sufficient to identify the real property" on which a lien may be claimed.
In addition to the notice of nonpayment, the contractor must also send to the owner a notice that the lien is claimed. This notice to the owner must be sent within 90 days from either the time the work is complete or within 90 days from the completion of the improvements. The lien of a contractor who did not contract directly with the owner is valid for 90 days from the date of the notice claiming the lien. The lien continues to be valid until the final termination of any suit for enforcement brought within the 90-day period.
A contractor without a direct contract with the owner must also file a sworn statement and notice of the lien in order to be protected from purchasers without notice.