One of the many reasons why a mechanics lien works is that it successfully encumbers a property. In effect, it limits a property’s market value because it acts as a record of outstanding debt that is publicly accessible for future buyers and financiers.
Property owners, therefore, are more likely to settle a payment dispute if a mechanics lien has been recorded against their property. However, filing a mechanics lien requires you to abide by strict rules and deadlines. In Arkansas, for example, construction participants have to serve pre-lien notices to preserve their lien rights.
This guide will explain all the rules and requirements concerning filing an Arkansas mechanics lien. We also list down the best practices that you should keep in mind to ensure that you maximize your lien rights.
- Who can file a mechanics lien in Arkansas?
- Preliminary notice in Arkansas
- When do you file an Arkansas mechanics lien?
- How to file a mechanics lien in Arkansas
- Best practices when filing a mechanics lien in Arkansas
Who can file a mechanics lien in Arkansas?
General contractors, subcontractors, and material suppliers are all allowed to record a mechanics lien in Arkansas. Parties such as engineers and architects also have lien rights in the state.
Preliminary notice in Arkansas
Arkansas has three important pre-lien notices to keep in mind: the Pre-Construction Notice to Owner, the Notice to Owner and Contractor, and the Notice of Intent to Lien. The first two notices are your regular preliminary notices served to preserve your lien rights, while the third one is a notice of intention filed when payment disputes have already come up in a project.
Let’s look into each notice one by one.
Pre-Construction Notice to Owner
Who must serve an Arkansas Pre-Construction Notice to Owner?
The Pre-Construction Notice to Owner must be served by general contractors of residential projects in Arkansas. When general contractors serve this preliminary notice, the lien rights of all other lower-tier contractors are subsequently protected.
However, lower-tier parties such as subcontractors and material suppliers may also serve the Arkansas Pre-Construction Notice to Owner themselves. Doing so protects their lien rights in case their general contractor fails to serve this notice.
What must appear in the Pre-Construction Notice to Owner?
Arkansas Code has a template for the pre-construction notice to owner, titled “Important Notice to Owner.” It is 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 KNOWTHAT 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.
ADDRESS OF PROPERTY ____________________
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.
Simply fill out the template above with the required details, but make sure that you write the statements in boldface type and in all capital letters.
When do you serve a Pre-Construction Notice to Owner?
The Pre-Construction Notice to Owner is served prior to commencing work on a project.
What happens if you do not serve a Pre-Construction Notice to Owner?
If you are a general contractor in a residential project and you fail to serve this Arkansas preliminary notice, you will lose your lien rights over that project.
If you are a lower-tier participant in a residential project (e.g., subcontractor, supplier), you will keep your lien rights as long as at least one party has served the preliminary notice. It is best practice to not give it to chance and instead serve this Arkansas preliminary notice yourself.
Notice to Owner and Contractor
Who must serve an Arkansas Notice to Owner and Contractor?
Parties who have no direct contract with the property owner of a commercial project are required to serve the Notice to Owner and Contractor. These parties include subcontractors and material suppliers.
What must appear in the Notice to Owner and Contractor?
According to Arkansas Code, the Notice to Owner and Contractor must show the following:
- A general description of the labor, service, or materials furnished, and the amount due and unpaid;
- The name and address of the person furnishing the labor, service, or materials;
- The name of the person contracted for purchase of the labor, service, or materials;
- A description of the job site sufficient for identification; and
- The following statement set out in boldface type and in 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.”
When do you serve a Notice to Owner and Contractor?
The Notice to Owner and Contractor must be served within the first 75 days of the date you first started working on a project. This notice is sent to both the property owner and the general contractor.
What happens if you do not serve a Notice to Owner and Contractor?
If you are required to serve this Arkansas preliminary notice and you did not do so on time, you will not be able to record a valid mechanics lien if payment disputes arise.
Notice of Intent to Lien
The Notice of Intent to Lien is a pre-lien notice that is different from the two other preliminary notices mentioned.
The first two are meant to preserve a construction party’s lien rights by informing the owners and other higher-tier parties about your participation in a project. The Notice of Intent to Lien, on the other hand, is served when payment issues have arisen and you are already about to file an Arkansas mechanics lien.
Who must serve an Arkansas Notice of Intent to Lien?
Every lien claimant (e.g. general contractors, subcontractors, material suppliers) in Arkansas must serve a Notice of Intent to Lien. Its purpose is to inform a property owner that you are about to make a claim of lien against their property.
What must appear in the Notice of Intent to Lien?
The Notice of Intent to Lien does not require a lot of information. Technically, you only need 1) the amount that is due and, 2) the party from whom this amount is due. The statement should also clearly state that you are planning to file a mechanics lien if the due amount is not paid.
You can also include the following details for completion:
- Your name and address
- The name and address of the property owner
- The address of the property in question
As long as you are clear with your intention of filing a mechanics if a specific amount is not paid, your Arkansas Notice of Intent to Lien should be good.
When do you serve a Notice of Intent to Lien?
A Notice of Intent to Lien in Arkansas is served 10 days prior to filing a mechanics lien. It is essentially a 10-day notice that gives the owner time to settle the outstanding debt before a mechanics lien gets recorded against their property. In some cases, serving a Notice of Intent to Lien alone is enough to get you your payment.
What happens if you do not serve a Notice of Intent to Lien?
You will not be able to record a valid mechanics lien in Arkansas if you do not serve a valid Notice of Intent to Lien. It is a requirement for all potential lien claimants with no exceptions.
When do you file an Arkansas mechanics lien?
A mechanics lien in Arkansas is filed within 120 days after the last substantial work was performed on a property. This 120-day deadline is strictly enforced. Your Arkansas Notice of Intent to Lien must be served at most 10 days before this 120-day deadline to ensure that you can file a valid Arkansas mechanics lien.
How to file a mechanics lien in Arkansas
1. Prepare the Arkansas mechanics lien form
Your Arkansas mechanics lien must have the following, according to Arkansas Code:
- A just and true account of the demand due
- An affidavit of notice attached to the lien account
- A correct description of the property to be charged with the lien, verified by affidavit
- The affidavit of notice containing:
o A sworn statement evidencing compliance with the applicable preliminary notice provisions
o A copy of each applicable preliminary notice given
o A copy of the proof of service for the Notice of Intent to Lien
Note that the property description must be a legal property description; a street address will not be considered a correct description. You also need to include the invoice statements to back up the “just and true account” of your demand.
Also, note the importance of the preliminary notices mentioned above. You need to keep copies of your preliminary notices and Notice of Intent to Lien as you need them for filing an Arkansas mechanics lien.
Be aware that the Arkansas mechanics lien must also be notarized before filing.
2. File the Arkansas mechanics liens
The Arkansas mechanics lien is filed with the clerk of the circuit court in the county where the property in question is located. Filing may be done via mail or in person.
When mailing your Arkansas mechanics lien form and attachments, make sure that your parcel contains the filing fees. Call the circuit court to confirm the exact amount needed to record a mechanics lien. It is a good idea to include extra copies of your mechanics lien documents and a self-addressed envelope so you can get back stamped copies of your recorded mechanics lien.
If you are filing in person, it is similarly a good idea to bring a second copy of every document so you can have an additional copy for your records.
After recording your mechanics lien, you may serve the additional copy on the property owner. This way, they are informed about your mechanics lien, which could prompt them to release your payment. This step is not required, but if an owner does not pay you within 20 days after receiving a copy of your mechanics lien, you may be entitled to recover attorney fees and other costs later on when you enforce your mechanics lien.
Note that the deadline for filing a mechanics lien in Arkansas is within 120 days after the date you last furnished labor or materials to a project. There is no extension for this deadline.
3. Enforce/release the mechanics lien
Once your Arkansas mechanics lien is recorded with the circuit court, you are all done. All you can do for now is wait to receive your payment or continue the negotiations and see what happens.
If you receive your payment, you have 10 days to file a release of lien document in the same circuit court where the mechanics lien was recorded. This is a required step according to the Arkansas Code. Failing to fulfill this requirement may subject you to penalties.
If, unfortunately, payment negotiations fall through and it does not seem that you will receive your payment, the next step is to enforce the Arkansas mechanics lien. Enforcing a mechanics lien means initiating a lawsuit against a property owner, and winning this lawsuit means recovering your payment through the foreclosure sale of the property.
Note that a mechanics lien in Arkansas is only enforceable up to 15 months from the date the mechanics lien was recorded. Beyond this 15-month period, the mechanics lien no longer has any hold over the property. You should therefore enforce an Arkansas mechanics lien way before it expires.
Before initiating a lawsuit, you may also want to first notify the property owner with a Notice of Intent to Foreclose. This can be the ultimatum you set on the owner, giving them a chance to settle the dispute before you launch a legal action. This is also a good way to nudge a property owner into paying up without having to go through an expensive lawsuit.
Best practices when filing a mechanics lien in Arkansas
1. Keep copies of all preliminary notices and proofs of service
When filing a mechanics lien in Arkansas, you need to include attachments pertaining to your preliminary notices. If you are required to file either the Pre-Construction Notice to Owner or the Notice to Owner and Contractor, be sure that you have copies of the documents that you served. Also keep a proof of service for when you deliver the Notice of Intent to Lien — this proof is required for filing a valid Arkansas mechanics lien.
2. Serve a copy of the recorded mechanics lien on the property owner
Arkansas does not require you to serve a copy of the mechanics lien on the property owner. However, doing so can potentially allow you to recover not only the due amount but also the lien fees and other attorney costs that you may have incurred when initiating a lawsuit to enforce a mechanics lien. It is, therefore, best practice to serve a copy of the recorded lien on the owner.
3. Serve a Notice of Intent to Foreclose before enforcing a mechanics lien
Legal action will be costly, so before enforcing an Arkansas mechanics lien, you should first serve a Notice of Intent to Foreclose on the property owner. This notice is not as pricey to deliver, and it can potentially be enough to get the attention of the property owners and finally prompt them to settle the outstanding payment.