Perspectives: Legal Changes Hit Construction Industry
The new Louisiana Private Works Act has a significant impact on liens.
As of January 1, 2020, all parties involved in private construction projects in the state must now comply with changes to the Louisiana Private Works Act (LPWA).
Included in the changes are the expansion of the definitions of “owner” and “immovable,” changes in the filing requirements for general contractors and owners, and clarification of the circumstances under which subrogation (substituting one person or group for another when it comes to debt or an insurance claim) operates in favor of contractors and subcontractors. General contractors who fail to file a notice of contract on a project exceeding $100,000 will now also be deprived of any privilege under the new LPWA.
The time period during which liens may be timely recorded has also changed and owners’ filings are now required to include property descriptions equivalent to that used in mortgages.
“A critical change was to La. R.S. § 9:4822, which governs deadlines to record liens,” said Kelly E. Theard, a partner with Deutsch Kerrigan, L.L.P. “The change in terminology from ‘within’ to ‘no later than’ under this provision makes clear that claimants are not required to wait until the commencement of the lien-filing period to file a lien.”
Scott Barney, a partner with Chaffe McCall, said he also sees the changes involving filing liens to be among the most notable.
“Under the old laws, a claimant where a Notice of Contract was filed but a Notice of Termination was not filed, arguably had an unlimited amount of time to file his lien,” he said. “Under the new laws, a claimant in those circumstances will have seven months if they are a general contractor, or six months for everyone else. That’s a significant limitation.”
Another significant change, according to Barney, is that general contractors can now provide a notice demanding that an owner record a Notice of Termination of completed or abandoned work. If the owner fails to comply, the general contractor can now get a judicial decree recognizing the work as terminated or completed. In the event that no notice of termination of the contract is filed, there are now new outside deadlines for lien filing. This revision distinguishes the LPWA from its companion Public Works Statute, which has been interpreted by some courts to render liens filed before the commencement of the lien-filing period as premature and invalid.
Based on the lien deadline changes, Theard said a general contractor should always take advantage to request the Notice of Termination from the owner to limit the time period for potential liens by other claimants.
“These requirements can be confusing and complicated,” she said, “so it is always best to consult an attorney as soon as possible to avoid any potential forfeiture of your lien right by failing to comply with the requirements of the new act.”
For instance, said Elizabeth L. Gordon, a partner with Shields/Mott LLP, “Before the changes, a Notice of Contract was required for projects costing $25,000 or more and had to include a legal property description. If a general contractor did not file a Notice of Contract in accordance with the statute, he would lose his lien right, and the time period for a subcontractor to file a lien was extended.”
In the new changes, a Notice of Contract must be filed for all projects $100,000 and up. In addition to the higher threshold, the Notice of Contract now only needs to provide a “complete property description” which is defined as “any description that, if contained in a mortgage of the immovable properly filed for registry, would be sufficient for the mortgage to be effective as to third persons.”
A general contractor who fails to file a Notice of Contract when it is required will not be entitled to file a lien.
“Louisiana property owners and developers will be excited to know that the changes to the Act make it easier to have an expired lien removed,” Theard said. “Now, under the new La R.S. 4833(E), if a lien is filed on an owner’s property and that lien expires, the owner can write a request to the recorder and have the lien released.”
This change eliminates the need to have the lien claimant sign off on the expired lien, thus helping property owners clean up expired liens on their property.
Theard said the current Louisiana lien deadlines apply if a project is completed prior to January 1, 2020. Meaning, if a Notice of Termination is filed before January 1, or if the project is substantially completed before January 1, 2020, the old deadlines apply.
“To avoid any confusion, the act goes a step further,” she said. “Even if a project is completed prior to January 1, 2020 and a Notice of Termination is filed later, a general contractor’s lien can’t be filed later than July 31, 2020. The same applies for other lien claimants, but the date is shortened to June 30, 2020. If a project ends right around January 1, and you’re unsure of which lien deadlines apply, it’s a good idea to play it safe.”
While there will likely be a period of adjustment, Barney said he feels the changes are long overdue.
“Some of these changes are in response to the old way not working as intended,” he said. “As issues became apparent, the rewrite began to be in the works.”