Construction Liens in Arkansas

By Larry Watkins, Esq. (AR)

Introduction

When a general contractor, subcontractor, or supplier has not received payment for completed, contracted work, one remedy available in Arkansas is a statutory construction lien. In this instance, a lien is a formal, official claim for an outstanding debt or late payment. If the contractor, subcontractor, or supplier of material, equipment, rentals, or services is successful in obtaining the lien, the lien attaches to the improvement on the real property – the construction site – where the party performed the work. This means the real property has an encumbrance. The power of a lien is that the party with the lien right, the contractor for example, can foreclose on the lien and sell the property for the outstanding amounts owed.

A lien is a powerful means to collect debts or late payments. However, as is appropriate, statutory liens have a number of requirements that the contractor, subcontractor, or supplier must fulfill to obtain and foreclose on a lien. In short, obtaining a lien is procedure-driven, requiring notices and filings. This article addresses the statutory scheme in Arkansas as well as the key steps that contractors, subcontractors, and suppliers must take. Although design professionals also have statutory lien rights in Arkansas, this article only addresses construction, equipment, and material liens for commercial projects. In the strongest of terms, I recommend that any contractor, subcontractor, or supplier hire an attorney to assist with liens as the courts leave no room for error.

Prerequisites: Contract + Labor, Materials, or Equipment

The Arkansas Code Annotated (“ACA”) in Section 18-44-101 et seq. covers the requirements for construction liens, and Subsection 101 spells out who is entitled to aconstruction lien. In summary, the claimant must be a contractor, subcontractor, or supplier and must have a contract to provide labor, service, material, or equipment. The statute states: “Every contractor, subcontractor, or material supplier…who supplies labor, services, material, fixtures, engines, boilers, or machinery in the construction or repair of an improvement to real estate…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…”

Required Party: Contractor, Subcontractor, and Material Supplier

For purposes of an ACA construction lien, a contractor must contract with an owner or an owner’s agent for an improvement or repair – work – and the owner must hold an interest in the property on which the contractor performs the work. A subcontractor that supplies labor or material must contract with the contractor or must be a sub-subcontractor to a subcontractor that contracts with the contractor. Material suppliers that provide material, equipment, or any other tangible item must contract with a contractor, subcontractor, sub-subcontractor, or sub-material supplier. Notice that the only party that has a contract with the owner is the contractor. Thus, for example, a masonry company that contracts with the owner would be a “contractor,” but if the same masonry company instead contracted with the general contractor, the masonry company would be a “subcontractor.”

Subcontractor and Material Supplier Notices

Two notices are required in Subsections 114 and 115(b) of the ACA. First, subcontractors and material suppliers must send a notice to the owner 10 days prior to filing a lien, and this notice must state the amount owed and the person who owes the amount (Subsection 114). Second, subcontractors and material suppliers that are entitled to payment for their work but have not been paid must send a notice to thecontractor and owner orowner’s agent before 75 days have elapsed from the time when they last provided labor or supplied materials for the project (Subsection 115(b)). The notice must contain the following information:

A general description of the work provided and the unpaid amount;
The name and address of the claimant subcontractor or material supplier;
The name and address of the party the subcontractor or material supplier contracted with;
A description of the project site where the work was performed or material provided; and
The following all-caps statement in bold face type:

“NOTICE TO PROPERTY OWNER"

IF BILLS FOR LABOR, SERVICES, OR MATERIALS USED TO CONSTRUCTOR 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 YOURSELFAGAINST 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.”

Because the courts strictly construe these statutes and compliance with them, it is critical that subcontractors and material suppliers follow them to the letter – both notices to the correct parties with all information.

Contractor Notices

For a contractor, presumably, the same two notices are required in Subsections 114 and 115(b) of the ACA. First, contractors must send a notice to the owner 10 days prior to filing a lien, and this notice must state the amount owed and the person who owes the amount (Subsection 114).

The second notice requirement in the statute is written for subcontractors and material suppliers, and the statute only mentions the contractor as receiving a notice (Subsection 115(b)). Neither the courts nor the legislature has clarified this. However, assuming the 75 day notice applies to contractors, a contractor that is entitled to payment for work but has not been paid must send a notice to the owner or owner’s agent before 75 days have elapsed from the time when the contractor last provided labor or supplied materials for the project. The notice must also contain the following information:

A general description of the work provided and the unpaid amount;
The name and address of the claimant subcontractor or material supplier;
The name and address of the party the subcontractor or material supplier contracted with;
A description of the project site where the work was performed or material provided; and
The following all-caps statement in bold face type:

“NOTICE TO PROPERTY OWNER"

The key takeaway for contractors here, as with subcontractors and material suppliers, is to follow the statute to the letter. Furthermore, despite the statutory uncertainty concerning the 75 day notice for contractors, contractors should assume that all notices the subcontractors and suppliers must provide the contractors must also provide.

Time Limitations

The last key point to remember is that after filing a lien, a contractor, subcontractor, or supplier has 15 months to commence an action (see Subsection119). Don’t sit on these rights.

Conclusion

In conclusion, it is critical that the party seeking to file a lien first ensure it falls within the categories of contractor, subcontractor, or material supplier. Second, there must be a contract between the claimant and owner, contractor, or subcontractor. Third, and this is where most errors occur, follow the notice procedures to the letter.

*The information in this article does not constitute legal advice and is for general educational purposes only.