August 27, 2018
Author: Stephen B. Niswanger
Organization: NISWANGER LAW FIRM PLC
I. What is a Materialman’s Lien?
A materialmen's lien is also known is a “mechanic’s and materialman’s lien” and a “construction lien.” It is a lien against real property arising from a specialized statutory procedure, designed to deal with some of the unique circumstances that confront contractors, subcontractors, and suppliers. For example, often the work and materials are contracted for or purchased from one party while the actual benefit goes to a third party, the building owner.1 When all goes well, the owner pays the contractor who has properly performed the contract who then pays the laborers, suppliers and subcontractors. The problem of course comes when all does not go well. The owner pays the contractor and for all sorts of reasons the rest of the parties are unpaid. Another slant on this subject occurs where the owner fails to pay the contractor. These basic situations will be the subject of this seminar for the rest of the day.
“It has long been held that mechanic's and materialmen's liens are in derogation of common law.” Bryant v. Jim Atkinson Tile, 100 Ark. App. 408, 410, 269 S.W.3d 383, 384 (2007), citing Books–A–Million, Inc. v. Ark. Painting and Specialties Co., 340 Ark. 467, 470, 10 S.W.3d 857, 859 (2000). At common law, the subcontractors and suppliers simply had no relief against the property owner with whom they did not have a contract. So, the subcontractors and suppliers turned to the legislatures to remedy this situation. “They were created by the legislature, and, because they are in derogation of common law, we construe these lien statutes strictly.” Id. This means that, at least in theory, the statutes are not liberally construed to help the subcontractors and suppliers but, rather, they are strictly construed to protect the landowners. See Books–A–Million, supra, 340 Ark. 467, 470, 472, 10 S.W.3d 857, 860, 861 (holding that “[t]he notice requirements are for the benefit and protection of the owner[,]” and must be “complied with strictly.”).
Under these construction lien statutes, the construction lien, if notice has been properly and timely given and if the lien has been properly and timely filed, allows the lien claimant the right to commence a lawsuit and, if successful, foreclose on the subject real estate and satisfy some or all of the indebtedness from the sale proceeds. This right can be a powerful tool in negotiating with the owner and general contractor to get paid.
II. Nature of the Lien.
In Arkansas, the right of a materialman to a lien is wholly dependent on the Mechanic’s and Materialman’s Lien statutes and its provisions. A good place to start is the statute that sets forth who and what the lien covers.
§ 18-44-101. Buildings, land or vessels
(a) Every contractor, subcontractor, or material supplier as defined
in § 18-44-107 who supplies labor, services, material, fixtures,
engines, boilers, or machinery in the construction or repair of an
improvement to real estate, or any boat or vessel of any kind, by
virtue of a contract with the owner, proprietor, contractor, or
subcontractor, or agent thereof, upon complying with the
provisions of this subchapter, shall have, to secure payment, a lien
upon the improvement and on up to one (1) acre of land upon
which the improvement is situated, or to the extent of any number
of acres of land upon which work has been done or improvements
erected or repaired.
(b) If the improvement is to any boat or vessel, then the lien shall be upon the boat or vessel to secure the payment for labor done or materials, fixtures, engines, boilers, or machinery furnished. ARK. CODE ANN. § 18-44-101 (2014 Westlaw Database).
The lien attaches to the entire land, even that part of the land which is not covered with the building, erection, or other improvement:
§ 18-44-102. Land subject to lien
The entire land, to the extent stated in § 18-44-101, upon which
any building, erection, or other improvement is situated including
that part of the land which is not covered with the building,
erection, or other improvement as well as that part of the land
which is covered with it, shall be subject to all liens created by this
subchapter to the extent, and only to the extent, of all the right,
title, and interest owned therein by the owner or proprietor of the
building, erection, or other improvement for whose immediate use
or benefit the labor was done or things were furnished.
ARK. CODE ANN. § 18-44-102.
“[T]he burden on the supplier to show that the materials for which he claims a lien were used in the improvement on which a lien was sought.” Del Mack Const., Inc. v. Owens, 82 Ark. App. 415, 419, 118 S.W.3d 581, 584 (2003). Thus, if the subcontractor has purchased the goods for a particular job, but used them in some other, there is no lien on the first job.
In addition, “[p]ublic policy . . . forbids the attachment of liens on public buildings and land for labor and materials furnished by contractors in the construction of public facilities.” Dow Chemical Co. v. Bruce-Rogers Co., 255 Ark. 448, 451, 501 S.W.2d 235, 237 (1973), citing Plummer v. School Dist. No. 1 of Marianna, 90 Ark. 236, 118 S.W. 1011; Holcomb v. American Surety Co., 184 Ark. 449, 42 S.W.2d 765.
Further, a materialman’s lien can be assigned:
§ 18-44-113. Assignment of liens
(a) The lien given in this subchapter shall be transferable and
assignable, but it shall not be enforced against the owner of the
ground or buildings unless the owner of the ground or buildings
shall have actual notice of the assignment or notice under
subsection (b) of this section.
(b) The owner of the ground or buildings shall be considered to
have actual notice if within thirty (30) days of the assignment a
copy of the assignment is:
(1) Hand delivered to the owner of the ground or buildings;
(2) Mailed to the last known address of the owner of the ground or
buildings and verified by a:
(A) Return receipt signed by the addressee or the agent of the
addressee; or
(B) Returned envelope, postal document, or affidavit by a postal
employee reciting or showing refusal of the notice by the addressee
or that the item was unclaimed; or
(3) Delivered by any means that provides written, third-party
verification of delivery at any place that the owner of the ground or
buildings maintains an office, conducts business, or resides.
ARK. CODE ANN. § 18-44-113. “Such liens must be perfected before they can be transferred or assigned.” Wyatt Lumber & Supply Co. v. Hansen, 210 Ark. 534, 147 S.W.2d 366, 368 (Ark. 1940).
III. Who Is Entitled to the Lien.
“Every contractor, subcontractor, or material supplier as defined in § 18-44-107 who supplies labor, services, material, fixtures, engines, boilers, or machinery” is entitled to the lien.
§ 18-44-107. Definitions
As used in this subchapter:
(1) “Contractor” means any person who contracts orally or
in writing directly with a person holding an interest in real
estate, or such person's agent, for the construction of any
improvement to or repair of real estate;
(2) “Material supplier” means any person who supplies materials,
goods, fixtures, or any other tangible item to the contractor or a
subcontractor, or an individual having direct contractual privity
with such persons;
(3) “Person” includes an individual, a partnership, a corporation, a
limited liability organization, a trust, or any other business entity
recognized by law; and
(4) “Subcontractor” means any person who supplies labor or
services pursuant to a contract with the contractor, or to a person in
direct privity of contract with such person.
ARK. CODE ANN. § 18-44-107.
The contractor is the most apparent of the potential claimants. The term is generally defined as one with a contract whether verbal or written with the owner or the owner's agent. The significant points are that there must be some form of contract and the parties. The obvious case is when a land owner signs a contract with your firm to construct or repair an improvement. The difficult situations arise when the person who contracts for the work is not an owner. Most commonly this is done by a tenant with or without a lease. There have been cases where one of a married couple contracts for work on property wholly owned by a spouse. Another, is when a person seeking to purchase real property makes some improvements, and the purchase falls through.
The latter two instances were unusual, but the situation regarding tenants comes up regularly. This often arises when a new business owner contracts for the completion of an interior finish of a shopping or strip center shell. A direct lien against the real property may be obtained if it can be shown that the lessee was an 'agent' of the owner for the purpose of the improvement. This can be shown if the claimant can establish that the owner paid for the improvements by allowing a deduction or offset from the rental payments. See Langston vs. Matthews, 117 Ark. 626, 173 S.W. 397 (1915). Otherwise, a claimant is limited to a lien against the actual improvement and the “leasehold” under A.C.A. 18-44-103.
§ 18-44-103. Leases
(a) Every building or other improvement erected or materials furnished, according to the provisions of this subchapter, on leased lots or lands shall be held for the debt contracted for, or on account of it, and also the leasehold term for the lot and land on which it is erected.
(b)(1) In case the lessee shall have forfeited his or her lease, the purchaser of the building and leasehold term, or so much of it as remains unexpired, under the provisions of this subchapter, shall be held to the assignee of the leasehold term and, as such, shall be entitled to pay to the lessor all arrears of rent or other money, interest, and costs due under the lease, unless the lessor shall have regained possession of the leasehold land, or obtained judgment for the possession of it on account of the noncompliance by the lessee with the terms of the lease, prior to the commencement of the improvements thereon.
(2) In this case the purchaser of the improvements under this subchapter shall have the right only to remove the improvements within sixty (60) days after he or she shall purchase them, and the owner of the ground shall receive the rent due him or her payable out of the proceeds of the sale, according to the terms of the lease, down to the time of removing the building.
ARK. CODE ANN. § 18-44-103
Over the years these statutes have been the subject of a number of “add ons,” and one such is represented by A.C.A. 18-44-104, concerning drainage material.
§ 18-44-104. Liens for soil or drain pipe or tile
(a) Every contractor, subcontractor, or material supplier who shall
furnish to any landowner any soil or drain pipe or tile for drainage
of his or her land, or who shall put in soil or drain pipe or tile for
any land, shall have a lien for each tract of forty (40) acres or less
of the real estate upon which the soil or drain pipe or tile is placed
for the payment of the lien.
(b)(1) The lien for the soil or drain pipe or tile shall attach to the
real estate and all improvements thereon in preference to any
subsequent liens, encumbrance, or mortgage executed upon the
land after the purchase of the soil or drain pipe or tile.
(2) The lien shall be:
(A) Subject to the notice requirements of §§ 18-44-114 and 18-44- 115;
(B) Filed under § 18-44-117; and
(C) Enforced under this subchapter.
ARK. CODE ANN. § 18-44-104. Another concerns architects, engineers, surveyors, appraisers, landscapers, abstractors, and title insurance agents:
§ 18-44-105. Lien of architect, engineer, surveyor,
appraiser, landscaper, abstractor, or title insurance agent
(a) Every architect, engineer, surveyor, appraiser, landscaper,
abstractor, or title insurance agent who shall do or perform any
architectural, engineering, surveying, appraisal, landscaping, or
abstracting services upon any land, or who shall issue a title
insurance policy or provide landscaping supplies upon any land,
building, erection, or improvement upon land, under or by virtue of
any written agreement for the performance of the work with the
owner thereof, or his or her agent, shall have a lien upon the land,
building, erection, or improvement upon land to the extent of the
agreed contract price or a reasonable price for those services.
(b)(1) However, the lien does not attach to the land, building,
erection, or improvement upon land unless and until the lien is
duly filed of record with the circuit clerk and recorder in the
county in which the land, building, erection, or improvement is
located.
(2) The lien shall be:
(A) Subject to the notice requirements of §§ 18-44-114 and 18-44- 115;
(B) Filed under § 18-44-117; and
(C) Enforced under this subchapter.
ARK. CODE ANN. § 18-44-105. There is an apparently redundant provision at Ark. Code Ann § 18-44-133. Plus, landscapers have a separate statutory provision, even though they are already covered in these two other statutory provisions. See ARK. CODE ANN. § 18-44-134. It is worth noting that it is a crime for any contractor, subcontractor, or other person who has performed work or furnished materials for the improvement of any property knowingly to receive payment of the contract price or any portion of it without applying the money so received toward the discharge of any liens known to the person receiving the payment:
§ 18-44-132. Criminal offenses--Fraud
(a) It shall be unlawful for any contractor, subcontractor, or other
person who has performed work or furnished materials for the
improvement of any property when the work or materials may give
rise to a mechanic's, laborer's, or materialman's lien under the laws
of this state, this subchapter, §§ 18-44-201--18-44-210, and § 18-
44-301--18-44-305, or any other statute providing for a
mechanic's, laborer's, or materialman's lien, or the assignee of such
person, knowingly to receive payment of the contract price or any
portion of it without applying the money so received toward the
discharge of any liens known to the person receiving the payment,
or properly record it as required by statutes, with the intent thereby
to deprive the owner or person so paying the contractor or other
person receiving payment of his or her funds without discharging
the liens and thereby to defraud the owner or person so paying.
(b) In any prosecution under this section as against the person so
receiving payment, when it shall be shown in evidence that any
lien for labor or materials existed in favor of any mechanic,
laborer, or materialman and that the lien has been filed within the
time provided by law in the office of the circuit clerk or other
officer provided by law for the filing of such liens, and that the
contractor, subcontractor, or other person charged has received
payment without discharging the lien to the extent of the funds
received by him or her, then the fact of acceptance of the payment
without having discharged the lien within ten (10) days after
receipt of the payment or the receipt of notice of the existence of
the lien, whichever event shall occur last, shall be prima facie
evidence of intent to defraud on the part of the person so receiving
payment.
(c)(1) If the amount of the contract price so received and not
applied to the discharge of the liens, with the intent to defraud,
shall exceed the sum of twenty-five dollars ($25.00), the party so
receiving shall be deemed guilty of a felony and shall be punished
by a fine not exceeding one thousand dollars ($1,000) or by
imprisonment in the Department of Corrections for not less than
one (1) year nor more than five (5) years, or by both.
(2) If the amount so received does not exceed the sum of twentyfive
dollars ($25.00), the party shall be deemed guilty of a
misdemeanor and punished by imprisonment in the county jail for
not more than one (1) year or by fine not less than ten dollars
($10.00) nor more than three hundred dollars ($300), or by both.
ARK. CODE ANN. § 18-44-132.
FILING AND PERFECTING A MATERIALMAN’S LIEN
The statutory notice and filing requirements for materialman’s liens are pretty complicated and were subjected to major amendments in 1995 and have been subjected to a lot of tinkering by the General Assembly since then. “The notice requirements are for the benefit and protection of the owner.” Books-A-Million, Inc. v. Arkansas Painting and Specialties Co., 340 Ark. 467, 470, 10 S.W.3d 857, 860 (2000). “It has long been held that mechanic's liens are in derogation of the common law.” Id. “Any statute in derogation of the common law will be strictly construed.” Id. Thus, the statutory notice provisions require strict compliance – not just merely substantial compliance – in order for a lien to be valid. See id. So, if the lien claimant fails to follow every single statutory requirement, his or her lien will be deemed invalid. There are several different statutory notice requirements, and we will cover these next.
I. PRE-WORK NOTICE (RESIDENTIAL ONLY).
In order for a claimant to be entitled to a lien against residential real estate, the owner must receive a “pre-work” notice in compliance with the statutory provisions:
(a)(1) No lien upon residential real estate containing four (4) or
fewer units may be acquired by virtue of this subchapter unless the
owner of the residential real estate, the owner's authorized agent,
or the owner's registered agent has received, by personal delivery
or by certified mail, a copy of the notice set out in this subsection.
(2) The notice required by this subsection shall not require the
signature of the owner of the residential real estate, the owner's
authorized agent, or the owner's registered agent in an instance
when the notice is delivered by certified mail.
ARK. CODE ANN. § 18-44-115(a)(1) (2014). The notice is as follows:
(7) The notice set forth in this subsection may be incorporated into
the contract or affixed to the contract and shall be conspicuous, set
out in boldface type, worded exactly as stated in all capital letters,
and shall read as follows:
“IMPORTANT NOTICE TO OWNER
I UNDERSTAND THAT EACH CONTRACTOR,
SUBCONTRACTOR, LABORER, SUPPLIER, ARCHITECT,
ENGINEER, SURVEYOR, APPRAISER, LANDSCAPER,
ABSTRACTOR, OR TITLE INSURANCE AGENT
SUPPLYING LABOR, SERVICES, MATERIAL, OR
FIXTURES IS ENTITLED TO A LIEN AGAINST THE
PROPERTY IF NOT PAID IN FULL FOR THE LABOR,
SERVICES, MATERIALS, OR FIXTURES USED TO
IMPROVE, CONSTRUCT, OR INSURE OR EXAMINE
TITLE TO THE PROPERTY EVEN THOUGH THE FULL
CONTRACT PRICE MAY HAVE BEEN PAID TO THE
CONTRACTOR. I REALIZE THAT THIS LIEN CAN BE
ENFORCED BY THE SALE OF THE PROPERTY IF
NECESSARY. I AM ALSO AWARE THAT PAYMENT MAY
BE WITHHELD TO THE CONTRACTOR IN THE
AMOUNT OF THE COST OF ANY SERVICES, FIXTURES,
MATERIALS, OR LABOR NOT PAID FOR. I KNOW THAT
IT IS ADVISABLE TO, AND I MAY, REQUIRE THE
CONTRACTOR TO FURNISH TO ME A TRUE AND
CORRECT FULL LIST OF ALL SUPPLIERS AND
SERVICE PROVIDERS UNDER THE CONTRACT, AND I
MAY CHECK WITH THEM TO DETERMINE IF ALL
MATERIALS, LABOR, FIXTURES, AND SERVICES
FURNISHED FOR THE PROPERTY HAVE BEEN PAID
FOR. I MAY ALSO REQUIRE THE CONTRACTOR TO
PRESENT LIEN WAIVERS BY ALL SUPPLIERS AND
SERVICE PROVIDERS, STATING THAT THEY HAVE
BEEN PAID IN FULL FOR SUPPLIES AND SERVICES
PROVIDED UNDER THE CONTRACT, BEFORE I PAY
THE CONTRACTOR IN FULL. IF A SUPPLIER OR
OTHER SERVICE PROVIDER HAS NOT BEEN PAID, I
MAY PAY THE SUPPLIER OR OTHER SERVICE
PROVIDER AND CONTRACTOR WITH A CHECK MADE
PAYABLE TO THEM JOINTLY.
SIGNED:________________________
ADDRESS OF PROPERTY _________________________
DATE:__________
13
I HEREBY CERTIFY THAT THE SIGNATURE ABOVE IS
THAT OF THE OWNER, REGISTERED AGENT OF THE
OWNER, OR AUTHORIZED AGENT OF THE OWNER OF
THE PROPERTY AT THE ADDRESS SET OUT ABOVE.
_________________________
CONTRACTOR”
ARK. CODE ANN. § 18-44-115(a). The contractor is required to give this pre-work notice or suffer the inability to enforce the contract if he does not get paid:
(3) It shall be the duty of the residential contractor to give the
owner, the owner's authorized agent, or the owner's registered
agent the notice set out in this subsection on behalf of all potential
lien claimants before the commencement of work.
(4) If a residential contractor fails to give the notice required under
this subsection, then the residential contractor is barred from
bringing an action either at law or in equity, including without
limitation quantum meruit, to enforce any provision of a residential
contract.
ARK. CODE ANN. § 18-44-115(a). In addition, if the contractor fails to give this notice, he may have committed a crime:
(6) A residential contractor who fails to give the notice required by
this subsection is guilty of a violation pursuant to § 5-1-108 and
upon pleading guilty or nolo contendere to or being found guilty of
failing to give the notice required by this subsection shall be
punished by a fine not exceeding one thousand dollars ($1,000).
ARK. CODE ANN. § 18-44-115(a).
A lien claimant may provide the notice if the contractor fails to do so.
(5)(A) Any potential lien claimant may also give notice.
(B)(i) If before commencing work or supplying goods a
subcontractor, material supplier, laborer, or other lien claimant
gives notice under this section, the notice shall be effective for all
subcontractors, material suppliers, laborers, and other lien
claimants not withstanding that the notice was given after the
project commences as defined under § 18-44-110(a)(2).
(ii) If the notice relied upon by a lien claimant to establish a lien
under this subchapter is given by another lien claimant under
subdivision (a)(5)(B)(i) of this section after the project
commences, the lien of the lien claimant shall secure only the
labor, material, and services supplied after the effective date of the
notice under subdivision (a)(5)(B)(i) of this section.
(C) However, no lien may be claimed by any subcontractor,
laborer, material supplier, or other lien claimant unless the owner
of the residential real estate, the owner's authorized agent, or the
owner's registered agent has received at least one (1) copy of the
notice, which need not have been given by the particular lien
claimant.
ARK. CODE ANN. § 18-44-115(a).
There are exceptions to the pre-work notice requirement:
(8)(A) If the residential contractor supplies a performance and
payment bond or if the transaction is a direct sale to the property
owner, the notice requirement of this subsection shall not apply,
and the lien rights arising under this subchapter shall not be
conditioned on the delivery and execution of the notice.
(B) A sale shall be a direct sale only if the owner orders materials
or services from the lien claimant.
ARK. CODE ANN. § 18-44-115(a).
II. 75-DAY NOTICE (COMMERCIAL ONLY)
Lien claimants on commercial projects don’t have to give the pre-work notice. The
General Assembly reasons as follows:
(b)(1)(A) The General Assembly finds that owners and developers
of commercial real estate are generally knowledgeable and
sophisticated in construction law, are aware that unpaid laborers,
subcontractors, and material suppliers are entitled to assert liens
against the real estate if unpaid, and know how to protect
themselves against the imposition of mechanics' and material
suppliers' liens.
(B) The General Assembly further finds that consumers who
construct or improve residential real estate containing four (4) or
fewer units generally do not possess the same level of knowledge
and awareness and need to be informed of their rights and
responsibilities.
(2) As used in this subsection:
(A) “Commercial real estate” means:
(i) Nonresidential real estate; and
(ii) Residential real estate containing five (5) or more units; and
(B) “Service provider” means an architect, an engineer, a surveyor,
an appraiser, a landscaper, an abstractor, or a title insurance agent.
(3) Because supplying the notice specified in subsection (a) of this
section imposes a substantial burden on laborers, subcontractors,
service providers, and material suppliers, the notice requirement
mandated under subsection (a) of this section as a condition
precedent to the imposition of a lien by a laborer, subcontractor,
service provider, or material supplier shall apply only to
construction of or improvement to residential real estate containing
four (4) or fewer units.
ARK. CODE ANN. § 18-44-115(b).
Nevertheless, a lien claimant on a commercial project must give a 75-day
notice to the owner in order to have a valid lien:
(4) No subcontractor, service provider, material supplier, or laborer
shall be entitled to a lien upon commercial real estate unless the
subcontractor, service provider, material supplier, or laborer
notifies the owner of the commercial real estate being constructed
or improved, the owner's authorized agent, or the owner's
registered agent in writing that the subcontractor, service provider,
material supplier, or laborer is currently entitled to payment but
has not been paid.
(5)(A) The notice shall be sent to the owner, the owner's
authorized agent, or the owner's registered agent and to the
contractor before seventy-five (75) days have elapsed from the
time that the labor was supplied or the materials furnished. . . .
(6) The notice shall contain the following information:
(A) A general description of the labor, service, or materials
furnished, and the amount due and unpaid;
(B) The name and address of the person furnishing the labor,
service, or materials;
(C) The name of the person who contracted for purchase of the
labor, service, or materials;
(D) A description of the job site sufficient for identification; and
(E) The following statement set out in boldface type and all capital
letters:
“NOTICE TO PROPERTY OWNER
IF BILLS FOR LABOR, SERVICES, OR MATERIALS
USED TO CONSTRUCT OR PROVIDE SERVICES FOR AN
IMPROVEMENT TO REAL ESTATE ARE NOT PAID IN
FULL, A CONSTRUCTION LIEN MAY BE PLACED
AGAINST THE PROPERTY. THIS COULD RESULT IN
THE LOSS, THROUGH FORECLOSURE PROCEEDINGS,
OF ALL OR PART OF YOUR REAL ESTATE BEING
IMPROVED. THIS MAY OCCUR EVEN THOUGH YOU
HAVE PAID YOUR CONTRACTOR IN FULL. YOU MAY
WISH TO PROTECT YOURSELF AGAINST THIS
CONSEQUENCE BY PAYING THE ABOVE NAMED
PROVIDER OF LABOR, SERVICES, OR MATERIALS
DIRECTLY, OR MAKING YOUR CHECK PAYABLE TO
THE ABOVE NAMED PROVIDER AND CONTRACTOR
JOINTLY.”
ARK. CODE ANN. § 18-44-115(b).
The notice must be served on the owner as follows:
(B) The notice may be served by any:
(i) Officer authorized by law to serve process in civil actions;
(ii) Form of mail addressed to the person to be served with a return
receipt requested and delivery restricted to the addressee or the
agent of the addressee; or
(iii) Means that provides written, third-party verification of
delivery at any place where the owner, the owner's registered
agent, or the owner's authorized agent maintains an office,
conducts business, or resides.
(C) When served by mail, the notice shall be complete when
mailed.
(D) If delivery of the mailed notice is refused by the addressee or
the item is unclaimed:
(i) The lien claimant shall immediately send the owner, the owner's
authorized agent, or the owner's registered agent a copy of the
notice by first class mail; and
(ii) The unopened original of the item marked unclaimed or
refused by the United States Postal Service shall be accepted as
proof of service as of the postmarked date of the item.
ARK. CODE ANN. § 18-44-115(b).
III. 10-DAY NOTICE (ALL CLAIMANTS)
All lien claimants must give the owner a 10-day notice that a lien is going to be filed.
(a) Every person who may wish to avail himself or herself of the
benefit of the provisions of this subchapter shall give ten (10) days'
notice before the filing of the lien, as required in § 18-44-117(a), to
the owner of a building or improvement that he or she holds a
claim against the building or improvement, setting forth the
amount and from whom it is due.
ARK. CODE ANN. § 18-44-114. The 10-day notice must be served as follows:
(b)(1) The notice may be served by any:
(A) Officer authorized by law to serve process in a civil action;
(B) Person who would be a competent witness;
(C) Form of mail addressed to the person to be served, with a
return receipt requested and delivery restricted to the addressee or
the agent of the addressee; or
(D) Means that provides written, third-party verification of
delivery at any place where the owner of the building or
improvement maintains an office, conducts business, or resides.
ARK. CODE ANN. § 18-44-114.
Depending on who served the 10-day notice, an affidavit from the server may be necessary:
(2)(A)(i) When served by an officer, his or her official return
endorsed on the notice shall be proof of the service.
(ii) When served by any other person, the fact of the service shall
be verified by affidavit of the person serving the notice.
ARK. CODE ANN. § 18-44-114. In addition, if service is completed by mail, a signed return receipt card is required:
(B)(i) When served by mail, the service shall be:
(a) Complete when mailed; and
(b) Verified by a return receipt signed by the addressee or the agent
of the addressee, or a returned envelope, postal document, or
affidavit by a postal employee reciting or showing refusal of the
notice by the addressee or that the item was unclaimed.
ARK. CODE ANN. § 18-44-114. As you know, some people refuse to sign the green cards to
claim the mailed items. The statute addresses this situation as follows:
(ii) If delivery of the mailed notice is refused by the addressee or
the item is unclaimed:
(a) The lien claimant shall immediately send the owner of the
building or improvement a copy of the notice by first class mail
and may proceed to file his or her lien; and
(b) The unopened original of the item marked unclaimed or refused
by the United States Postal Service shall be accepted as proof of
service as of the postmarked date of the item.
ARK. CODE ANN. § 18-44-114. The General Assembly has also provided for alternative methods of service of the notices where the owner is a resident or absconder. See ARK. CODE ANN. § 18- 44-116.
IV. FILING THE LIEN.
A lien claimant must file his lien account with the Clerk of the Circuit Court within 120 days after material has been furnished or the work or labor done or performed. The lien account must be filed with the Clerk of the Circuit Court in the county where the land is located, and it must contain matters set forth in the statute:
(a)(1) It shall be the duty of every person who wishes to avail
himself or herself of the provisions of this subchapter to file with
the clerk of the circuit court of the county in which the building,
erection, or other improvement to be charged with the lien is
situated and within one hundred twenty (120) days after the things
specified in this subchapter shall have been furnished or the work
or labor done or performed:
(A) A just and true account of the demand due or owing to him or
her after allowing all credits; and
(B) An affidavit of notice attached to the lien account.
(2) The lien account shall contain a correct description of the
property to be charged with the lien, verified by affidavit.
(3) The affidavit of notice shall contain:
(A) A sworn statement evidencing compliance with the applicable
notice provisions of §§ 18-44-114 --18-44-116; and
(B) A copy of each applicable notice given under §§ 18-44-114 --
18-44-116.
ARK. CODE ANN. § 18-44-117. “The clerk shall refuse to file a lien account that does not contain
the affidavits and attachments required by this section.” Id. § 18-44-117(b)(3).
As was said above, a lien claimant must file his lien account within 120 days after material has been furnished or the work or labor done or performed. “Despite this express limitations period, the Arkansas Supreme Court has carved out a narrow tolling exception to the statutory limitations period, applicable when a materialman furnishes a builder with supplies on an ‘open’ or ‘running’ account.” Falcon Steel, Inc. v. J. Russell Flowers, Inc., 635 F.3d 369, 374 (8th Cir. 2011) (construing Arkansas law). “Under this exception, if a materialman (1) begins to furnish supplies without any specified agreement as to the amount to be furnished, or the time within which they were to be furnished, and (2) there was reasonable expectation that further material would be required of him, and he was afterwards called upon, from time to time, to furnish the same, he should file [the accounting] within 90 days [now, 120 days] after the last item was delivered.” Id., citing Kizer Lumber Co. v. Mosely, 56 Ark. 544, 20 S.W. 409, 410 (1892) (internal quotations omitted).
In addition, “the Arkansas Supreme Court has clarified that the last material is ‘furnished’ upon delivery of the material at or near the construction site, not when it is actually incorporated into the structure.” Falcon Steel, supra. Once the lien claimant complies with the statute, “the lien arises and relates back to the time of the performance.” In re McCord, 219 B.R. 251, 252 (Bkrtcy. E.D. Ark. 1998). “The lien attaches to buildings or other improvements and is given preference, with some exceptions, to prior and subsequent liens, encumbrance, or mortgages.” Id.; see ARK. CODE ANN. § 18-44-110. You’ll see how the preference issue plays out later in the seminar.
The lien will become invalid unless an action to enforce the lien is commenced within 15 months of the filing of the lien:
a) All actions under this subchapter shall be commenced within
fifteen (15) months after filing the lien and prosecuted without
unnecessary delay to final judgment.
(b) No lien shall continue to exist by virtue of the provisions of this
subchapter for more than fifteen (15) months after the lien is filed,
unless within that time:
(1) An action shall be instituted as described in this
subchapter; and
(2) A lis pendens is filed under § 16-59-101 et seq.
ARK. CODE ANN. § 18-44-119.
1 Many thanks to Junius Bracy “J.B.” Cross, Jr., who let me borrow from his outline used at a 2008 Construction
Lien Law seminar in Little Rock on the same topic.