Notice of Nonpayment by Corporation
Note: This summary is not intended to be an all inclusive
discussion of Tennessee's construction or mechanic's lien laws, but does
include basic provisions.
What is a construction or mechanic's lien?
Every State permits
a person who supplies labor or materials 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 document with the
local court that puts parties interested in the property on notice that
the party asserting the lien has a claim. States differ widely in
the method and time within which a party may act on their lien. Also
varying widely are the requirements of written notices between property
owners, contractors, subcontractors and laborers, and in some cases lending
institutions. As a general rule, these statutes serve to prevent
unpleasant surprises by compelling parties who wish to assert their legal
rights to put all parties who might be interested in the property on notice
of a claim or the possibility of a claim. This by no means constitutes
a complete discussion of construction lien law and should not be interpreted
as such. Parties seeking to know more about construction laws in
their State should always consult their State statutes directly.
Who can claim a lien in this State?
There shall be a lien upon
any lot of ground or tract of land upon which a house or structure has
been erected, demolished, altered, or repaired, or for fixtures or machinery
furnished or erected, or improvements made, by special contract with the
owner or the owner's agent, in favor of the contractor, mechanic, laborer,
founder or machinist, who does the work or any part of the work, or furnishes
the materials or any part of the materials, or puts thereon any fixtures,
machinery, or material, and in favor of all persons who do any portion
of the work or furnish any portion of the materials for such building;
provided, that the subcontractor, laborer or materialman satisfies all
of the requirements set forth in § 66-11-145, if applicable.
How long is a lien good for?
The lien shall include
the building, structure, fixture, or improvement as well as the lot or
land, and continue for one (1) year after the work is finished or materials
are furnished, and until the final decision of any suit that may be brought
within that time for its enforcement.
Does this State require or provide for a notice
from subcontractors and laborers to property owners?
Yes. Any person
claiming a lien for labor or materials upon the property described in the
notice of completion who has not previously registered such person's contract
as provided in § 66-11-111 or registered a sworn statement as provided
in § 66-11-112 or § 66-11-117 shall send by registered or certified
mail written notice addressed to the person, firm or organization and at
the address designated in the notice of completion for receiving notice
of claims, stating the amount of the claim and certifying that the claim
does not include any amount owed to the claimant on any other job or under
other contract.
A mechanic's lien shall
have precedence over all other subsequent liens or conveyances during such
time; provided, that a sworn statement of the amount due and/or approximating
that to accrue for such work, labor, or materials, and a reasonably certain
description of the premises, shall be filed, within the ninety-day period
referred to in § 66-11-115(b).
In order to be protected
from lien claims which have not previously been registered as provided
in §§ 66-11-111, 66-11-112, and 66-11-117, the owner or purchaser
of improved real property may, upon completion of the improvement or the
demolition thereof, register in the office of the register of deeds in
the county where the real property or any affected part thereof is located
a notice of completion, or the owner or purchaser may require a person
or organization with whom the owner or purchaser has contracted for the
improvements or demolition to do so upon completion of the structure or
improvement or demolition.
Does this State require or provide for a notice
from the property owner to the contractor, subcontractor, or laborers?
A filing for record is required to be done within ninety (90) days after
the building or structure or improvement is demolished, altered and/or
completed, as the case may be, or is abandoned and the work not completed,
or the contract of the lienor expires or is terminated or the lienor is
discharged, prior to which time the lien shall be effective as against
such purchasers or encumbrancers without such registration; provided, that
the owner shall give thirty (30) days' notice to contractors and to all
of those lienors who have filed notice in accordance with § 66-11-145
prior to the owner's transfer of any interest to a subsequent purchaser
or encumbrancer for a valuable consideration.
Does this State require a notice prior to starting
work, or after work has been completed?
In order to be protected
from lien claims which have not previously been registered as provided
in §§ 66-11-111, 66-11-112, and 66-11-117, the owner or purchaser
of improved real property may, upon completion of the improvement or the
demolition thereof, register in the office of the register of deeds in
the county where the real property or any affected part thereof is located
a notice of completion, or the owner or purchaser may require a person
or organization with whom the owner or purchaser has contracted for the
improvements or demolition to do so upon completion of the structure or
improvement or demolition.
Does this State permit a person with an interest
in property to deny responsibility for improvements?
Yes. The owner
of any such building or structure in the process of erection or being altered
or repaired, other than the person by whom or in whose behalf a contract
for labor or materials has been made, may prevent the attaching of any
lien for labor thereon not at the time performed or materials not then
furnished by giving notice, in writing, to the person performing or furnishing
such labor or furnishing such materials that he will not be responsible
therefor.
Is a notice attesting to the satisfaction of a
lien provided for or required?
Yes. In fact,
Tennessee law provides that a property owner may issue a written demand
to a lien claimant whose lien has been satisfied that the lien claimant
execute and file an acknowledgment of lien.
Does this State permit the use of a bond to release
a lien?
Yes.
If a lien, other than a lien granted in a written contract, is fixed or
is attempted to be fixed by a recorded instrument under this chapter, any
person may record a bond to indemnify against the lien. Such bond
shall be recorded with the register of deeds of the county in which the
lien was filed. Such bond shall be for the amount of the lien claimed with
corporate surety authorized and admitted to do business in the state of
Tennessee and licensed by the state of Tennessee to execute bonds as surety,
and such bond shall be conditioned upon the obligor's satisfying any judgment
that may be rendered in favor of the person asserting the lien. The
bond shall state the book and page or other reference and the office where
the lien is of record. The recording by the register of a bond to
indemnify against a lien shall operate as a discharge of the lien.
After recording the bond, the register shall return the original bond to
the person providing the bond. The register shall index the recording of
the bond to indemnify against the lien in the same manner as a release
of lien. The person asserting the lien may make the obligors on the
bond parties to any action to enforce the claim, and any judgment recovered
may be against all or any of the obligors on the bond.
