Senate Bill 3011

AN ACT TO AMEND SECTION 85-7-181, MISSISSIPPI CODE OF 1972, TO PROVIDE FOR THE PROTECTION OF PROPERTY OWNERS FROM A LIEN ON ALL MONIES ATTRIBUTED FOR THE AMOUNT DUE A SUBCONTRACTOR OR SUPPLIER OF THE CONTRACTOR FOR WORK PERFORMED OR MATERIALS FURNISHED IN MAKING IMPROVEMENTS THEREON; TO PRESCRIBE THE PROCEDURE BY WHICH SUCH LIEN MAY BE ENFORCED; TO PROVIDE FOR A PAYMENT OR PERFORMANCE BOND IN LIEU OF THE LIEN; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 85-7-181, Mississippi Code of 1972, is amended as follows:

85-7-181. (1) Except as otherwise provided herein, there shall be a lien on all monies attributed to the improvements thereon, upon which any structure or other improvement is erected, constructed, altered or repaired, in favor of subcontractors of the contractor and suppliers of the contractor who perform work or furnish materials for such structure or other improvement. The lien rights afforded under this section shall not apply to claims of subcontractors or suppliers in any case in which the contract between the owner and contractor is less than Twenty-five Thousand Dollars ($25,000.00), or in any case in which the structure or improvement is made to a one- to four-family dwelling, a water well, an oil and gas well or railroad or railroad embankment.

(2) The lien provided for in subsection (1) shall take effect, as to purchasers or encumbrances for a valuable consideration without notice thereof, only from the time of filing of a claim of lien in the office of the clerk of the chancery court as provided in this section, except that the lien of a deed of trust securing a construction loan recorded prior to the filing of a claim of lien as provided herein shall have priority over any lien claimant under this section.

(3) Delivery of material to the job is prima facie evidence of its use therein.

(4) Every subcontractor or supplier who has furnished labor or material used in the construction of the structure or other improvement and who has not been paid before the expiration of a period of forty-five (45) days after the date of the last payment period for labor performed by him or materials furnished by him shall have the right to file suit to enforce a lien against all monies remaining or the structure or other improvement from which has been constructed in the amount due and owing for work performed or materials furnished or both work and materials; provided that:

(a) Within forty-five (45) days from commencing to perform work at or furnish materials to the construction site in accordance with the terms and provisions of the contract, such subcontractor or supplier provides the notice of lien right set forth in subsection (5) of this section to the owner or owners of the land, to any lender having a recorded mortgage or deed of trust on the land upon which such structure or other improvement is located, and to the contractor; and

(b) Within forty-five (45) days of the date the first payment draw was due, such subcontractor or supplier:

(i) Files a claim of lien in the office of the chancery clerk of the county where the project is located; and

(ii) Provides a copy of such claim of lien to the owner or owners of the land, to any lender having a recorded mortgage or deed of trust on the property upon which such structure or other improvement is located, and to the contractor; provided, however, that no claim of lien may be filed prior to the date the labor is performed or material furnished to the property.

(5) The notice of lien right to the owner, lender and contractor required by subsection (4)(a) of this section shall be given in writing by the subcontractor or supplier to the owner, or one (1) of the owners if more than one (1), at the owner's residence or any place where the owner maintains an office or conducts business, to the lender at the address of the lender disclosed on the recorded mortgage or deed of trust, or if no such address appears, then at the principal office of the lender, and to the contractor at the contractor's principal office. Such notice may be personally delivered by the subcontractor or supplier or it may be mailed by certified mail, return receipt requested, postage prepaid, to the owner, or one of them, and to the lender and contractor. The failure to serve the notice of lien right, or to timely serve it, shall be a complete defense to enforcement of a lien by any person. The serving of the notice of lien right shall not dispense with recording the claim of lien required by subsection (4)(b) of this section. The notice of lien right shall not be a lien, cloud or encumbrance on the real property. Such notice of lien right may be given in the following form, which shall be sufficient:

"NOTICE TO OWNER

To _______________________, owner or lender:

Take notice, that the undersigned is about to furnish (or has within fifteen (15) days furnished) __________________________, your contractor, certain material or performed certain subcontract work or both for the construction, repair or alternation of the structure or other improvement being constructed on the following described property:

____________________________________________________________________________________________________________________________________ and there will become due to the undersigned on account thereof the price of said material or subcontract work or both, for the payment of which the undersigned will claim a lien.

IMPORTANT INFORMATION FOR YOUR PROTECTION:

If your contractor fails to pay any and all subcontractors or material suppliers without just cause or neglects to make other legally required payments, you the land owner may be included in legal action to remedy payment. However, and to avoid such conflict, be it enacted with this legislation that if land owner is provided written affidavit from the prime contractor before subsequent payments are required that evidences prior payment to subcontractors for goods and/or services have been made such lien or further legal encumbrance that shall stem from such failure to pay said subcontractors and/or material suppliers shall be null and void.

Under Mississippi's laws, those who work on your property or provide materials and are not paid have a right to enforce their claim for payment AGAINST ALL MONIES DUE AT TIME OF LIEN. This claim is known as a construction lien."

(6) The claim of lien required by subsection (4)(b) of this section shall be filed and recorded in the chancery clerk's office where the land is located in accordance with Section 85-7-133, provided that there shall be no right nor requirement of a lienholder under this section to file a contract pursuant to Section 85-7-139.

(7) Notwithstanding anything to the contrary contained herein, the amount claimed in a suit to enforce a lien under this act is subject to contractual provisions or conditions imposed upon the lien claimant.

(8) No suit may be maintained by a subcontractor or supplier to enforce the lien provided hereunder unless the notices required by this section shall have been given and filed, respectively, within the time required.

(9) The persons protected by this lien statute, subject to the notice provisions set forth above, are the landowner, subcontractors and material suppliers of the contractor.

(10) This construction lien shall not eliminate the subcontractors and material suppliers right to stop payment.

(11) A suit to enforce a lien arising under this act shall be commenced within the time and in the manner provided by Section 85-7-141; shall be conducted in accordance with Sections 85-7-143, 85-7-145, 85-7-147, 85-7-149, 85-7-151, 85-7-153, 85-7-155 and 85-7-157; and shall be maintainable even though the general or primary contractor has been paid in full if such contractor has not paid the person entitled to enforce lien rights under this section; provided that such lien shall take effect as to purchasers or encumbrancers for a valuable consideration without notice thereof, only from the time of filing the claim of lien in the office of the clerk of the chancery court as hereinabove stated, except that the lien of a deed of trust securing a construction loan recorded prior to the time of filing a claim of lien as provided herein shall have priority over the claim of any lien claimant under this section.

(12) If such structure or other improvement upon which a lien is claimed hereunder is erected, constructed altered or repaired at the instance of a tenant, guardian or other person not the owner of the land, only the building, structure or improvement, and the estate of the tenant or such other person, in the land, shall be subject to such lien, unless the same be done by the written consent of the owner. Whenever the contract is performed at the instance of a tenant, guardian or other person who is not the owner of the land, then the reference in this act to owner shall mean the tenant, guardian or other person who is not the owner of the land, as applicable.

(13) Venue on any suit under this section shall lie in the county in which the structure or other improvement is located or in the county in which service of process may be obtained upon the owner.

(14) As used in this section, "contractor" means the person or persons having a contract or contracts with the owner; "subcontractor" or "supplier" means any person or entity having a direct contract with the "contractor." No lien rights are afforded hereunder to anyone other than those defined herein as "subcontractor" or "supplier" to the contractor.

SECTION 2. If a payment or payment and performance bond with sufficient surety in an amount equal to the cost of construction of such structure or other improvement is provided by the contractor covering the claims of subcontractors and suppliers to the contractor, then subcontractors or suppliers to the contractor shall have a claim solely under the bond and not against the owner's property. In accordance with Section 85-7-185, Mississippi Code of 1972, such bond shall cover the claims of subcontractors or suppliers regardless of whether so expressly stated in the bond, and suit on the bond shall be brought by a subcontractor or supplier in accordance with the provisions of Sections 85-7-187 through 85-7-195, Mississippi Code of 1972. The bond herein provided for may be made by any surety company authorized to do business in the State of Mississippi; provided, however, that when separate payment and performance bonds are provided, the claims of subcontractors and suppliers shall be covered solely by the payment bond. Filing and recording of a bond claim is not required.

Any rights in favor of other parties provided in a bond shall be valid and enforceable in accordance with the terms of the bond.

A supplier or subcontractor supplying labor or materials or both for the structure or other improvement, upon request to the contractor and surety, shall be furnished with a certified copy of the contract between the contractor and owner and bonds executed by the contractor and surety.

SECTION 3. In the event that the contractor does not provide a bond in accordance with Section 2 of this act, and in the further event that a subcontractor or supplier claiming a lien for labor or materials upon any property shall submit a notice of lien right and file a lien within the time and in the manner prescribed above, then the owner of such property, or any mortgagee or other person asserting an interest in the property, or any contractor, subcontractor or other person who may be liable for the payment of said lien, shall have the right to file in the construction lien book in the land records of the chancery clerk where the project is constructed a bond for one and one-half (1-1/2) times the amount of said lien claimed with sufficient surety, conditioned upon the obligor's satisfying any judgment that may be rendered in favor of the person asserting said lien. The bond herein provided for may be made by any surety company authorized to do business in the State of Mississippi. Upon the filing of such bond, the lien upon the property covered by the bond shall be discharged. If the bond is filed, the person asserting the lien may make the obligor on the bond party to any action to enforce his claim and any judgment recovered by the claimant may be against the obligor on the bond, as well as against any other party liable to the claimant.

SECTION 4. Any attempted contractual waiver of the rights afforded by this act shall be void and unenforceable. The provisions of this act are cumulative and supplemental to all other laws of this state.

SECTION 5. This act shall take effect and be in force from and after July 1, 2004.