Filing of the Notice of Contract: Protecting Your Rights from the Beginning
It has come to our attention in several different contexts that many contractors do not file a Notice of Contract in a private project as provided for in La. Rev. Stat. (LRS) 9: 4811, et. seq. [1] Some, often at the insistence of a project architect, file the entire contract; while others file nothing at all.
Failure to file a Notice of Contract, or filing an inadequate one, can be disastrous; without a Notice of Contract conforming to the statute, a general contractor on a project for more than $25,000 will have no lien rights against the owner’s property. Moreover, the lien period is extended to sixty days, vice thirty days with a Notice.
At best, filing the entire contract is a waste of money. A construction contract can frequently run many pages; typically, a Notice of Contract runs a page or two, and the filing cost is by the page. At worst, lack of a proper Notice of Contract can cost the Contractor and subs lien rights, or priority in lien rights.
1. Lien Rights– Without a proper Notice of Contract, a general contractor on a contract for more that $25,000, has no lien rights unless a Notice of Contract is filed. [2]
Second, a proper Notice of Contract establishes the date on which the priority of all liens from the project are ranked against competing mortgages or liens of third parties, which might be filed after work begins. [3]
Third, from the standpoint of the general contractor and Owner,[4] the period for filing the lien is only thirty days from completion if a proper notice is filed, and sixty days if no notice is filed.
2. Form of Lien– The statute is clear that a proper notice must: (1) properly identify and be signed by both owner and contractor; (2) contain “a legal property description” of the property, and the name of the project; (3) identify the parties and give their correct mailing addresses; (4) state the price of the work, or if not fixed price, description of how price calculated (e.g. unit price, cost plus or whatever), and a estimate of the price; (5) state when the price is to be paid; and (6) describe in general terms the work to be done.
An error in any of these is not necessarily fatal to the validity of the notice unless it prejudices a claimant or third party claiming rights in the property; but if the error or omission is in the identity or address of the parties, or “improper identification of the immovable”, such an error or omission “shall be prima facie proof of actual prejudice.” In other words the lien claimant must prove the competing claimant was not prejudiced.
Proper description of the property has been held to mean that a description by metes and bounds is required, and that a street address is not adequate. Best practice is to obtain, preferably from the owner, a copy of the property description on the sale by which the owner acquired the property. A principal difference between simply filing the contract itself, and filing a proper notice, is the description of the property, since a formal description of the property is rarely included in the contract itself.
Written for The Legal Blueprint, 2008, Issue 1.
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[1] This note applies only to private works; filings for public works are different and are governed by a different statute, LRS 38:2241.1.
[2] LRS 9:4811
[3] LRS 9:4810 A(1)
[4] LRS 9:4822 A
[5] LRS 9:4822 C
[6] LRS 9:4811 A
[7] LRS 9:4811 B
