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Alabama lien law.

Every state permits a person who supplies labor, materials or services for a construction project to claim a lien against the improved property. While some states differ in their definition of improvements and some states limit lien claims to buildings or structures, most permit the filing of a lien with the local court that puts parties interested in the property on notice that the party asserting the lien has a claim. Alabama provides an effective statute which includes two notice to owner options designed to trap funds and identify potential claimants to the owner. The statute as a whole is effective in protecting contractors and suppliers while providing safeguards for the defense of property owners.

All potential lienors, with the exception of an original contractor (a contractor with a direct contract with the owner who is exempted from the notice requirement), must fulfill three basic pre-requisite steps to perfecting a lien: 1) provide statutory notice to the owner; 2) file a verified statement of lien in the probate office of the county where the improvement is located; and 3) file suit to enforce the lien.

There are essentially two types of liens in Alabama: 1) The "unpaid balance" lien in which a contractor or person furnishing material may file a lien for the unpaid balance due the contractor by the owner; and 2) the "full price" lien in favor of those in direct contact with the owner and--in some cases, materialmen.

Unpaid Balance Lien

Alabama Code [section] 35-11-210 provides for an unpaid balance lien as follows:
   Every mechanic, person, firm or corporation who shall do or perform
   any work, or labor upon, or furnish any material, fixture, engine,
   boiler, waste disposal service and equipment or machinery, for any
   building or improvement on land, or for repairing, altering or
   beautifying the same, under or by virtue of any contract with the
   owner or proprietor thereof, or his agent, architect, trustee,
   contractor or subcontractors, upon complying with the provisions of
   this division, shall have a lien therefore on such building or
   improvements on land on which the same is situated ... A lien shall
   extend only to the amount of any unpaid balance due the contractor
   by the owner or proprietor, and the employees and materialmen shall
   also have a lien on the unpaid balance.


[ILLUSTRATION OMITTED]

The unpaid balance lien is only good if full payment has not been made to the prime contractor. When there is no unpaid balance due the contractor, no lien may be established. This lien also covers employees of the contractor or persons furnishing materials to him. The full price lien favors the supplier only if the supplier gave notice to the owner before furnishing materials.

Full Price Lien.

Alabama Code [section] 35-11-210 also provides for a full price lien as follows:
   But if the person, firm or corporation, before furnishing any
   material, shall notify the owner or his agent in writing that
   certain specified material will be furnished by him to the
   contractor or subcontractor for use in the building or improvements
   on the land of the owner or proprietor at certain specified prices,
   unless the owner or proprietor or his agent objects thereto, the
   furnisher of such material shall have the lien for the full price
   thereof.


The "full price" lien is based on the existence of either an express or implied contract of the owner to pay for materials (Richard v. Little). The contract need not be in writing (Sherrod v. Crane Co.). The contract may be implied from the owner's silence following receipt of notice from the materialman (Buettnerbros. v. Good Hope Missionary Church). The statute appears to make the "full price" lien by advance notice available only to materialmen and not to those applying labor and services (Crane Co. v. Sheraton Apartments, Inc.).

So, in essence, a full price lien requires written notice to the owner that "such certain, specified material will be furnished by (the supplier) to the contractor or subcontractor for use in the building or improvements on the land of the owner or proprietor at certain specified prices. While the statute does not specify how much notice is required to establish a full price lien, it is presumed that sufficient notice must be given to provide the owner reasonable opportunity to object in writing "before the material is used."

Even though the time may have passed to provide the advance notice of a full price lien, the potential lienor may provide the owner written notice to establish an unpaid balance lien. The only timing provision for such notice is that it be given before the filing of a verified statement of lien. Once the notice is given, any unpaid balance in the hands of the owner is held subject to such a lien.

Therefore, regardless of the type of lien, before filing a Statement of Lien, a claimant must first provide statutory notice to the owner in the form of either a Notice to Owner (Prior to Performance) or a Notice to Owner (Unpaid Balance) Lien as appropriate. Only after providing the statutory Notice to Owner is a claimant allowed to file a verified Statement of Lien.

When filing any lien, special attention should be paid to the property description. The statute specifically provides that, with regard to property located in a city or town, a "description by house number, name of street and name of city or town" is sufficient. The verified statement of lien must be filed in the office of the judge of probate of the county where the subject property is located. When the property is located in more than one county, the statement must be filed in each county. Lien claimants will be well advised to describe the property at issue as accurately as possible.

Ala. Code [section] 35-11-213 sets forth a statutory form for a verified statement of lien. The strict use of this statutory form is not necessary as long as the form used is in substantial compliance with [section] 35-11-213 (Harper v. J&C Trucking and Excavating Co., but see Hill v. Hill (merely filing a lease agreement was not sufficient to allow enforcement of lien)). Generally, the verifying statement must set forth the amount of the demands secured by the lien, contain a description of the property on which the lien claims and the name of the owner or proprietor of the land. Interest is recoverable at the rate provided for by the contract between the parties or at the maximum rate allowed by Alabama law. Attorney's fees are recoverable only if provided for by the contract between the parties.

Different time periods are prescribed by statute for filing of the verified Statement of Lien depending on the status of the potential lienor. Laborers must file the statement within 30 days, original contractors must file within six months and every other claimant must file within four months after the last item of work or materials has been performed or furnished.

Any lien claimed on real property may be transferred from such real property to other security by first filing a copy of the lien, which has been duly filed, and by either depositing with the court a sum of money or filing a surety bond executed by a qualified surety (bonding off the lien). Such sum of money or bond shall be in an amount equal to the amount demanded in such claim of lien plus interest thereon at 8% per year for three years plus $100 to apply on any court costs, which may be taxed in any proceeding to enforce the lien.

The third and final step is to file suit in the circuit court (or district court when the amount is $50 or less) of the county where the property is located. If the subject property is located in two or more counties, separate actions must be brought in each of the involved counties. Suit must be filed within six months from the time when the debt is contractually due and payable to the lienor.

With the exception of the general contractor and any "original contractor" all claimants under the mechanic's lien law "stand on an equal footing" regardless of who filed their verified Statement of Lien first, or who gave notice to the owner first, or who began supplying materials to the project first. Consequently, if funds from the sale of the improved property (together with the unpaid balance due the original contractor) are insufficient to satisfy all of the liens in full, then they are distributed pro rata among each of the mechanics and materialmen who obtain a judgment establishing his lien. *

Greg Powelson is director of NACM'S Mechanic's Lien and Bond Services (MLBS). He may be reached at gregp@nacm.org. Powelson is conducting a lien and bond workshop in November. Refer to the MLBS ad on page 13 for more information.
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Title Annotation:extra credit
Author:Powelson, Greg
Publication:Business Credit
Geographic Code:1USA
Date:Sep 1, 2008
Words:1478
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