News Maker – Louisiana

In J Reed Constructors, Inc. v. Roofing Supply Group, LLC, a split judicial panel in Louisiana's Court of Appeal for the First Circuit has affirmed a lower court ruling that says materialmen must provide notice to the general contractor and owner within 75 days of each month in which product was delivered or else they will lose the right to file a privilege or lien on the material from that time period.

Suppliers will have to file separate notice of nonpayment before 75 days from the last day of the month, every month, in which material was delivered instead of before 75 days from the final day it provided material, as most believed was the intent of existing statute. Both Daniel Lund III, Esq., partner with Shields Mott Lund LLP, and the lone dissenting judge on the panel criticized the ruling as a break from the logical, rational intent of the legislation. However, the other judges' reading of existing statute was consistent with that circuit's reputation of trying to avoid rewriting the law or acting as activist judges, said Lund. In essence, the ruling can be largely chalked up to vaguely written statutory language.

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Amendment to Virginia Mechanic’s Lien Code Approved

The Virginia General Assembly has adopted an amendment to the Mechanic's Lien Code providing that an unlicensed contractor may not claim a mechanic's lien if a valid contractor's license or certificate was required by law for the work performed. The bill also requires that the lien claimant place licensing information on the face of the lien memorandum, including the license number, the date that the license was issued, and the date it will expire, or certify in the affidavit that a license was not required by law for the type of work performed. This law firm did work with lobbyists and industry associations to get a revision that an inaccuracy in the license information on the lien memorandum does not invalidate the mechanic's lien if the lien claimant can otherwise be reasonably identified in the records of the Board of Contractors.

To see the text of the bill as currently drafted and adopted by both the House and the Senate, go to http://lis.virginia.gov/cgi-bin/legp604.exe?131+ful+HB1913S1

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News Makers - Oklahoma HB1087

HB 1087, an amendment to Oklahoma's mechanic's and materialmen's lien statute that provides for a lien filing to include profit and overhead costs, went into effect on November 1, 2013. A filer can now seek "an amount inclusive of all sums owed to the person at the time of the lien filing, including, without limitation, applicable profit and overhead costs." The requirements for filing remain the same.

This provision is the first change in many years to Oklahoma's lien law, and though this is the only change to the statute, the amendment wording has some saying it lacks clarity, leaving the door open for future debate. "I would assume the invoice that a vendor issues to his customer would include his overhead costs and any expected profit," said James Vogt, Esq., managing partner at Reynolds, Ridings, Vogt & McCart PLLC,Vogt. "When the legislature used the word 'including' it seems to confuse the issue. If the legislature had used the word 'and' instead of 'including,' it might be easier for a judge to interpret. I doubt this was reviewed by any lawyer and, as usual, the addition of these few words will probably create more legal work for lawyers."

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News Maker – California, Arizona, Nevada, New Mexico, Washington - Stop Notice Challenge

Mississippi's Fifth Circuit Court of Appeals' decision last month that rendered its Stop Notice statute unconstitutional could very well foster challenges in other states such as Arizona, California, Nevada, New Mexico and Washington that have similar Stop Notice statutes.

"I'm sure some GC will take a shot at it," said James Reed, Esq., partner at Baird Williams & Greer LLP. However, Reed is confident that any challenge would be extremely unlikely to gain traction as most of these states have preliminary notice language (e.g., 20 days in California and Arizona, 31 days in Nevada). This language distinguishes them from the Mississippi statute, which the court ruling noted as having a "profound" lack of procedural safeguards, in an important way. "The basis for the decision doesn't apply in the southwest," Reed said. "I don't see dominos tipping."

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News Maker – Mississippi

The United States District Court for the Northern District of Mississippi has ruled that Mississippi's Stop Notice statue is unconstitutional. The fallout from the decision is unclear, but it could make it more difficult to get lines of credit from suppliers and contractors.

The state's Fifth Circuit Court of Appeals affirmed a 2012 lower court ruling in the case Noatex Corp. v. King Construction of Houston, LLC that the Stop Notice statute, as written, violated the due process of companies. Therein, the court decision released in October included the following:

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New North Carolina P3 Law Includes Payment Bond Requirement

A new North Carolina law (Ch. SL 2013-401) authorizing the use of public-private partnerships and design-build on non-transportation public work in the state includes payment assurances for construction subcontractors and suppliers. The new law, which becomes effective on Sept. 22, 30 days after North Carolina Gov. Pat McCrory (R) signed the legislation (HB 857) on Aug. 23, 2013, requires payment bonds in the amount of 100 percent of the "total anticipated amount of the construction contracts to be entered into between the private developer and the contractors." North Carolina joins a growing list of states that have enacted laws to help assure that subcontractors and suppliers will be paid for work they perform and services they provide on construction components of projects financed through P3s. Depending on how a construction project funded by both public and private sources is structured, the project may be exempt from both payment bond requirements and mechanic's liens, leaving subcontractors and suppliers without payment assurances. In April, ASA unveiled a legislative work kit containing model state legislation to help ASA chapters address the lack of payment assurances for subcontractors working on P3 projects. The legislative work kit is available in the Government Advocacy section of the ASA Chapter Toolbox. ASA is also leading efforts before Congress to ensure that subcontractors and suppliers have the same payment rights on federal projects financed through P3s as they do on more traditional federal projects.

Source: ASA Today, the weekly news bulletin of the American Subcontractors Association

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Disclosure Requirement Legislation Introduced.

In a recent American Subcontractor Association (ASA) edition of Contractor's Compass, ASA reported that Legislation has been introduced that will require General Contracts who bid and accept Federal Construction projects in excess of $1,000,000 disclose any subcontractor hired by that General Contractor who completes any subcontract work in excess of $100,000.

http://www.asaonline.com/eweb/TCC/TCCSept2013/index.html

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News Maker - IOWA

Mechanic's Notice and Lien Registry Changes

Iowa's Mechanic's Notice and Lien Registry, which launched on January 1, is up-and-running without significant issue. Liens must now be filed electronically in the registry, housed on the Iowa Secretary of State's website, as part of the shift ushered in by the passage of Iowa House File 565. Among other changes, it provides that any civil action by a subcontractor against a general contractor or owner-builder will be approved by the Secretary of State's office (the administrator) rather than a District Court.

Still, the larger purpose of the registry continues to be to protect residential homeowners more so than contractors or materials providers. Prospects of a change in the upcoming Iowa legislative session appear unlikely. A spokesperson for the Secretary of State' office said there have been 2,668 lien filings through September 10, 2013 and 82,439 total visitors. The spokesperson admitted the law is much more geared to assist residential homeowners than any other stakeholders. Other mechanic's lien-related bills previously introduced before the 2013-2014 recess, including House Study Bill 215, have either been withdrawn, "died" in committee or had parts folded into HF 565. The spokesperson said there were no known legislative efforts related to this or mechanic's lien changes in general for the remainder of the 2013-2014 Session, which is set to pick up business again later this fall.

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News Makers - ILLINOIS

Mechanic's Lien Substitution

A bill proposed in the 98th Illinois General Assembly that would allow changes for when an applicant can substitute a bond for the existing mechanic's lien does not appear to be on a fast track in the Illinois House.

As noted in a previous News Maker entry, HB 2804, proposed by Rep. Arthur Turner, sought to amend the state's existing Mechanic's Lien act to allow an applicant to petition at any time before judgment a substitution of a bond for a mechanic's lien. At this time, there does not seem to be a strong push for this or any other new mechanic's lien-related proposals in Illinois. A spokesperson for Turner told NACM that it "could take a few years to get it moving." The proposal failed to gain traction, and like many bills at the end of the Illinois session, was moved to the Rules Committee (on March 22, 2013). Still, it bears watching to see if a renewed push is established when the Assembly returns to session on October 22.

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News Maker - CALIFORNIA

CALIFORNIA:  On Aug. 13, California Governor Jerry Brown signed AB 164 "An act to amend Section 5956.6 of the Government Code, relating to infrastructure financing".  The new law, originally sponsored by Bob Wieckowski and Jeff Gorell, will help assure that subcontractors and suppliers will be paid for work they perform and services they provide on construction projects financed through public-private partnerships also known as P3's.

Payment bonds to secure the payment of claims of laborers, mechanics, and materials suppliers employed on the work under the contract. Payment bonds required under this subdivision shall conform to the requirements of Sections 9550 to 9566, inclusive, of the Civil Code.

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