If a material supplier is not paid properly, it has a right to place a legal claim—or lien—on the property to secure payment of a debt or the satisfaction of an obligation.
As a general rule, the limitation period in most jurisdictions for filing a materialman’s lien on a property, assuming all other conditions have been met, begins when the materials are delivered to the property. Suppose, however, a contractor or an owner orders goods to be specially manufactured for a particular project. If the owner or contractor wrongfully prevents delivery or incorporation of these specially manufactured goods into the property, should the materialman be allowed to lien the project? The answer is “yes,” assuming the materialman has otherwise satisfied the conditions for filing a lien.
In many jurisdictions, one condition for allowing a materialman’s lien on a construction project is for the lienor to file and properly serve a notice to the owner. This raises an issue: When does the clock start ticking on the deadline to provide the required notice to the owner? In most cases, this would be the date the materialman first supplied the goods. As a rule of thumb, this also is the date when the materials were delivered to the jobsite, to the owner or to the contractor.
However, this rule does not apply in the case of specially manufactured goods. These goods cannot be provided until they are actually manufactured, and the manufacturing process can take some time. Therefore, some courts have ruled that the starting date for the deadline period to file the required notice to the owner begins when the materialman starts to fabricate the goods.
Generally, the primary difference between specially manufactured goods and other goods is that the specially manufactured goods are not readily saleable in the marketplace. Assuming all other requirements have been met, the deadline for filing a materialman’s lien against a property begins on the last day the materials were furnished. This has been interpreted by many courts to mean the last date of delivery.
If a project owner prevents a materialman from delivering goods that otherwise could be purchased over the counter, the materialman is not entitled to file a lien against the property because the materialman has the ability to sell these goods in the open marketplace. If the materialman sustains damages, such as out of pocket delivery expenses, a suit for damages can be filed against the party that wrongfully prevented delivery.
On the other hand, because there is no marketplace for specially manufactured goods, many states allow materialmen that specially manufacture goods to lien a property—even if the owner or contractor that ordered the goods decides they are no longer needed. In such cases, many statutes entitle the materialman to its lien.
If the owner or contractor reneges, when does the deadline for filing the lien start? Some jurisdictions have yet to address this question through the legislature or the courts, so the materialman would be wise to take a conservative approach. Assume the deadline starts on whichever of the following is earlier: the date the materialman was prevented from delivering the goods to the site, or the date the materialman substantially completed the fabrication of such goods.
By taking a conservative approach, the materialman minimizes the risk that its lien could be challenged as having been filed in an untimely fashion.
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Friday, September 3, 2010