Do we need to submit a pre construction lien notice before actually starting to work?

01/09/2007 - Category:Contractors - Construction Liens - State: TN #253

Full Question:

We are a subcontractor on a Tennessee project. Do we need to submit a pre construction lien notice before actually starting to work?

Answer:

A contractor's lien is a claim made by contractors or subcontractors who have performed work on a property who have not yet been paid. The priority of liens on a construction project does not depend upon the time of completion of the particular job, but rather everything relates back to the first visible commencement of the work. This stipulation means the final work, such as painting, is equal in priority to the initial work of laying a cement foundation. Therefore, during the entire work of construction, the owner must obtain lien releases or waivers of lien from each subcontractor and material supplier. Without these waivers or releases the real estate is subject to liens of all the subcontractors, even if the general contractor, though paid in full, fails to pay the subcontractors.

In Tennessee, a contractor who contracts directly with the owner need not give any formal notice to the owner in order to preserve lien rights against the owner. However, if the contractor desires to perfect the lien against someone who purchases the owner's land without notice of the lien, then the contractor must file a sworn statement. Submitted within 90 days after the project is completed or within 90 days from the contractor's last work on the project, this statement must include the amount due and a complete legal description of the land.

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 legal description of the real property.

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.



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01/09/2007 - Category: Construction Liens - State: TN #253

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