Sweet Home Alabama & Its Mechanic’s Lien Rights
I can’t help but start singing “Sweet Home Alabama” anytime I hear someone say Alabama. Today, in addition to singing “Sweet Home Alabama,” I’m going to hum my way through mechanic’s lien rights in Alabama. Although, “Sweet Home Alabama, where liens are so due” doesn’t have quite the same feel as the original.
Sweet Home Alabama, Where Liens Are So Due!
Securing lien rights for private projects in Alabama begins with serving a preliminary notice. Serve the preliminary notice upon the owner prior to first furnishing materials or services. The owner’s receipt of the preliminary notice prior to furnishing may allow for a full balance lien, provided the owner does not disclaim responsibility before the materials are used.
If the preliminary notice was not served prior to furnishing, or if a Notice of Objection has been received from the owner, you should serve a Notice to Lien upon the owner as soon as possible after each furnishing to trap funds, and serve a Notice to Lien upon the owner after last furnishing. Serving the construction lender with the notice may improve the priority of your lien.
The mechanic’s lien deadline varies and is dependent on whether you contracted with the owner, GC, Sub, or if you provided only laborers.
- When contracting directly with the prime contractor or a subcontractor: File the lien within 4 months from last furnishing materials or services.
- When contracting directly with the owner: File the lien within 6 months from last furnishing materials or services.
- Laborers: File the lien within 30 days from last furnishing labor.
Who Has Priority in Alabama: Lender or Lien Claimant?
Authors Madeline Hughes and Stephen Pudner recently reviewed GHB Construction and Development Co., Inc. v. West Alabama Bank and Trust in their article Alabama Supreme Court Clarifies Construction Lien Priority.
The lien claimant argued its mechanic’s lien had priority over the construction lender’s mortgage. Unfortunately for the claimant, the lender’s mortgage was created prior to the lien claimant’s first furnishing, which meant the lender’s mortgage had priority.
The language within Ala. Code § 35-11-211 (a) states a materialman’s lien takes priority over all other liens and encumbrances created “subsequent to the commencement of work.”
“Such lien as to the land and buildings or improvements thereon, shall have priority over all other liens, mortgages, or incumbrances created subsequent to the commencement of work on the building or improvement.”
There was an additional point of contention that the lender hadn’t disbursed funds prior to the lien claimant’s first furnishing, but whether or not funds have been disbursed impacts priority in Alabama. Hughes & Pudner recapped the case:
“This holding emphasizes Alabama’s policy of ensuring that construction projects continue to be funded. This case tells contractors that: 1) contractors should not assume their work will take priority over future-advance mortgages even when the work is performed before the loan proceeds are extended; and 2) a contractor’s commencement date is crucial and will control priority against other lenders, and therefore, it is imperative that contractors memorialize that date and that they know whether any mortgages have been entered into and recorded before that date. In Alabama, it does not seem to matter whether that mortgage is a future advance or traditional mortgage.”