A mechanic’s lien is an incredible collection tool.
It gives subcontractors the ability to collect even if there was no direct contract with the owner (note: the subcontractor’s lien rights are more limited in Missouri when dealing with residential property, as discussed below).
Once a lien attaches, it is incredibly difficult to remove from the property, absent payment to the claimant.
However, it is not impossible to do so. There are several defenses that can help an owner clear the lien off his/her/its property in the event that one is filed.
This article will specifically discuss 5 defenses an attorney can assert on an owner’s behalf to defend against mechanic’s liens.
Although the purpose of the mechanic’s lien act is a remedial one, mechanic’s liens are creatures of statute and therefore require strict compliance with the statutory prerequisites in order to be effective. As such, the statutory elements that make up a lien are the most logical area to attack first.
If any of these elements are lacking, the lien can be attacked on grounds of inadequacy. It should be noted that Missouri courts usually impose the standard of “reasonable and substantial compliance” with the mechanic’s lien statutes. Lake Ozark Const. Indus., Inc. v. Osage Land Co., 168 S.W.3d 471, 472 (Mo. Ct. App. 2005), as modified (May 31, 2005).
One of the first elements deals with legally describing the property in the lien.
1. The Mechanic’s Lien Must Contain the Proper Legal Description
The statute requires the mechanic’s lien to provide “a true description of the property, or so near as to identify the same, upon which the lien is intended to apply” R.S.Mo. § 429.080; see also Breckenridge Material Co. v. Byrnesville Const. Co., 842 S.W.2d 551, 552 (Mo. Ct. App. 1992).
In the Breckenridge Material case, the lien claimant included a property description that failed to enclose the tract of land.
The Court of Appeals stated the following with respect to construing the legal description:
Although a claimant must substantially comply with the statute in order to secure its benefits the description of the property need not be letter perfect. Rather, when the rights of third parties are not involved, the description need only be sufficient to enable one familiar with the locality to identify the premises intended to be covered by the lien.” Breckenridge Material Co. v. Byrnesville Const. Co., 842 S.W.2d 551, 552 (Mo. Ct. App. 1992)(internal citations omitted).
The court held that the failure to enclose the tract of land was merely a typographical error that was in substantial compliance with the lien statutes. Id. Given the remedial purpose of the mechanic’s lien statute, the Court held that it was an enforceable lien. Id.
However, in the event that the description of the property upon which the lien is to be filed does not provide a description sufficient for someone familiar with the locality to ascertain the same, then it probably is subject to attack for failure to include an essential element.
2. Failure to File or Foreclose on the Lien within the Applicable Statute of Limitations Period
Nearly every cause of action has a statute of limitations. When dealing with a mechanic’s lien, the statute of limitations is critically important because the authority for the liens is statutory. Many Missouri courts refer to liens as “creatures of statute” and therefore the lien claimant must closely comply with the statute, especially the permissible filing period, or his/her/it’s lien rights do not technically exist under the law.
The lien filing time may not be extended by agreement between the parties either. The Missouri Court of Appeals ruled on a case dealing with two parties, who purported to extend the lien filing time by contract. The Court held the following:
The effect of [§§ 429.010, 429.080, and 429.180] is to limit the duration of the opportunity to secure the lien. If the plaintiff does not comply with the time requirements of filing the lien, the lien is lost. The requirement of filing the lien on time is not something which defendant can enlarge…A mechanic’s lien is a creature of statute, and not of contract.
Manning Const. Co. v. MCI Partners, LLC, 419 S.W.3d 134, 138 (Mo. Ct. App. 2013).
“Under chapter 429, there are two statutes of limitation that a claimant must comply with in order to perfect its mechanic’s lien, section 429.080 and section 429.170. Section 429.080 states that a lien must be filed within six months after the debt has accrued (i.e. within six months of completion of the work).” J.H. Berra Paving Co. v. City of Eureka, 50 S.W.3d 358, 361 (Mo. Ct. App. 2001).
“Section 429.170 states that an action to enforce the mechanic’s lien must commence within six months after filing the lien. An action to enforce is “‘commenced within the statute by the filing of a petition and the issuance of the summons.’” J.H. Berra Paving Co. v. City of Eureka, 50 S.W.3d 358, 361 (Mo. Ct. App. 2001)(citing City–Wide Asphalt Co., Inc. v. Industrial Paving, Inc., 838 S.W.2d 480, 482 (Mo.App.1992) (citing Continental Electric Co. v. Ebco, Inc., 375 S.W.2d 134, 137 (Mo.1964))).
“It is therefore well settled under the mechanic’s lien law that a plaintiff must bring suit within six months after filing the lien and if no suit is brought during this time, the lien is lost.” J.H. Berra Paving Co. v. City of Eureka, 50 S.W.3d 358, 361 (Mo. Ct. App. 2001)(citing Badger Lumber Co. v. Staley, 141 Mo.App. 295, 125 S.W. 779, 780 (1910)).
3. The Mechanic’s Lien Statement must be Notarized
Pursuant to R.S.Mo. § 429.080, the mechanic’s lien must have “verification by the oath of [the lien claimant] or some credible person for him.”
Verification is just a legal name meaning that the document needs to be notarized.
While this seems like a simple element, many unsophisticated contractors quickly browse through the mechanic’s lien statutes and forget to cross their T’s and dot their I’s. While notarizing a lien is simple, it is incredibly important.
This element is critical as it lends to the credibility of the document. Also, the statute requires it, so the contractor must satisfy this element to have a valid lien.
Getting a document notarized is simple and can usually be done at the bank. Make sure that you do not sign the document, however, until you are in the presence of the notary. This is important because the notary cannot verify that the signature is yours unless s/he watches you sign the same. The representative/notary assisting you will also require (or should require) that you present some form of valid identification.
Other places that might have notaries available for use include credit unions, real estate brokerage firms, and sometimes the courthouse, and occasionally local libraries, depending on the county and municipalities.
Regardless of where you decide to get your mechanic’s lien notarized, just make sure you get it done before filing it.
To avoid the hassle of searching for a notary and filing the lien, you can hire a lawyer, who usually has a notary on staff to facilitate the process.
4. A Subcontractor’s Mechanic’s Lien must include an Itemized Statement of the Account
A “just and true account” forms the basis of the right to maintain a suit to enforce a mechanics’ lien. R.S.Mo. § 429.080; See Glenstone Block Co. v. Pebworth, 264 S.W.3d 703 (Mo. App., 2008).
“To facilitate fulfillment of the statutory requirement to file a just and true account, Missouri courts have developed distinct requirements for general contractors and subcontractors. ‘An ‘original’ [general] contractor may make a ‘just and true account’ if his lien statement simply states his account in a lump sum, without itemization.’ A subcontractor, on the other hand, must ‘include in his lien account an itemized statement of the labor and materials furnished.’” Commercial Openings, Inc. v. Mathews, 819 S.W.2d 347, 349–50 (Mo. 1991)(internal citations omitted).
For subcontractors, the itemized statement subjects their lien statement to much scrutiny. In order for the subcontractor’s lien to be valid, it must include items that Missouri courts deem lienable.
What items are lienable?
Generally labor and materials that are incorporated into the project qualify as “lienable items.”
Below are some examples of items that courts have deemed as lienable items.
“[M]aterials such as lumber, paneling, and sheet rock, used in the construction of a residence are lienable.” Missouri Land Dev. Specialties, LLC v. Concord Excavating Co., 269 S.W.3d 489, 505 (Mo. Ct. App. 2008)(citing Boyer Lumber, Inc. v. Blair, 510 S.W.2d 738, 747 (Mo.App.1974).
“Items such as tape, paint and paint brushes, sandpaper, and saw blades may be included in a mechanic’s lien if they are used up or consumed in improving the property.” Id.
There is a slew of items that may fall under the “lienable” category, but the lien claimant needs to ensure that these items were incorporated into the improvements on the property or that these items were directly used in making the improvements on the property.
In any case, subcontractors need to substantiate their lien claims and attach supporting documentation.
5. A subcontractor does not typically have lien rights on owner-occupied residential property.
Only under very rare circumstances does a subcontractor have lien rights on residential property in Missouri.
There are a few exceptions when a subcontractor can file a mechanic’s lien on residential property, but typically, when the work is performed on an owner occupied property of 4 units or less, the subcontractor will not have valid lien rights. R.S.Mo. § 429.013.
Instead, the applicable statute requires that the subcontractor have a consent from the owner to lien the property. A subcontractor rarely ever has this consent because general contractors are reluctant to ask a homeowner for a consent to lien their property at any point in the project, and the subcontractor often does not have a direct relationship with the homeowner. Therefore, subcontractors do not have lien rights on an owner-occupied residential property with any significant frequency.
In conclusion there are a number of different defenses that can be asserted when property is under a threat of a mechanic’s lien filing. This article has discussed a number of the defenses and intricacies relating thereto.
The following are some of the defenses that an owner can assert when facing the threat of a lien filing:
- The mechanic’s lien must contain a proper legal description;
- The lien must be filed and foreclosed on within the applicable statute of limitations periods;
- The mechanic’s lien statement must be notarized;
- Any subcontractor’s lien must contain an itemized list of the expenses;
- Subcontractors usually will not have lien rights on owner-occupied residential property.
As an owner of real property that could be under fire, it is important to know the rights that can be asserted to protect your investment (or one of your most prized possessions). If you find yourself in this type of situation, please contact one of our construction lawyers, so we can advise you as to your rights.
If you know any additional defenses to mechanic’s liens, we would like to hear your comments and feedback.
Defending Missouri Merchandising Practices Act Claims
Any contractors who work on residential property will inevitably have to deal with a difficult customer at some point in their career.
The customer may raise various issues about your work. like complaining about whether the work is defective or not, the aesthetic appeal, and a garden variety of other issues that arise in these situations.
In the event that a consumer, or “putative consumer,” brings a claim against a contractor on the basis of the Missouri Merchandising Practices Act, the contractor’s attorney should know several defenses to protect the client from such claims.
This article was designed to provide a few but certainly not all, common defenses used by a contractor in a Missouri Merchandising Practices Act claim case.
The first defense deals with the issue of damages.
1.No ascertainable damages – the work was not defective, or even if it was defective, no damages resulted
One of the elements of a Missouri Merchandising Practices Act claim is that the damages need to be ascertainable. Oftentimes the homeowner may be unpleased with the work product of a contractor, but the homeowner will not have actually incurred damages.
The homeowner’s dissatisfaction with the aesthetics of a contractor’s work product might be an example of an area that may not cause the homeowner actual damages.
This is not always the case, however, as it may be a question of fact for the judge or jury to make a judgment call on as to what the contract says regarding aesthetics and/or whether the work was performed in a good and workmanlike manner.
Another situation where the homeowner may not incur damages is if a contractor performs defective work on a project but subsequently remedies that defective work.
In any event, the damages element of the Missouri Merchandising Practices Act is a susceptible place which your lawyer should consider attacking in the event you are sued in these types of situations.
2. Superseding/Intervening Force (i.e., third party) caused damages
If the contractor was not the cause of the damages, then obviously the consumer’s claim is subject to attack. This is a common defense as many projects consist of a slew of different people working on the job simultaneously.
The work performed by one contractor may cause damage to or adversely affect the work of another contractor. In these situations, the superseding/intervening force (another contractor) can be a defense to a Missouri Merchandising Practices Act claim.
Depending on the language contained in the contract, acts of God may also relieve a contractor from contractual duties. As this defense is specific to the factual circumstances, and in particularly the language in the contract, each case needs to be individually assessed.
If you have a question about a construction law case, please feel free to contact one of our attorneys.
3. The construction work was not for personal, family, or household purposes
If you’re working on a residence, you still cannot be sure that the residence is owned by a consumer. This element must be proven by the alleged consumer.
However, when a project has commercial aspects or when the owner of the property, even if it appears residential, is a commercial entity, you may have a defense to a Missouri Merchandising Practices Act claim.
One example of a susceptible area of attack would be work performed on a rental home. Often times limited liability companies will own rental homes and will have a contractor perform work on their property.
If you are a construction company defending a consumer protection act claim, you should always check the deed of the property and be cognizant of the entity that is making the payments.
Depending on the factual circumstances, a lawyer defending one of these cases may be well-advised to assert a defense attacking the personal, family, or household element.
Conclusion: Contractor Defenses Against Consumers on a Construction Project
This article gives a few defenses that you can assert as a contractor if you’re caught in the middle of a consumer protection case. There are other defenses out there, but you should always consult an experienced construction law attorney when preparing your defense in a case.
The following is a list of the three potential defenses discussed in this article:
- No ascertainable damages – the work was not defective, or even if it was defective, no damages resulted
- Superseding/Intervening Force (i.e., third party) caused damages
- The work was not for personal, family, or household purposes
Depending on the facts of your case, these defenses could be your liability shield. Your lawyer should be aware of these defenses and, more importantly, should assert them in any applicable cases.
Our firm deals with construction contracts on a regular basis. Nearly all work performed on a construction project is carried out pursuant to a contract with the owner, contractor, subcontractor, or some other party on the project.
The purpose of the contract is to govern the relationship between the entities and determine the duties and obligations that the contract imposes upon said parties. That’s why when problems occur on the project, you need to know the terms of the contract. You also should have a lawyer review or draft your contract before beginning a project.
The lawyer can explain your rights to you, and help you understand your responsibilities on the job.
Assistance with Construction Contracts
In order to protect our clients on a project, our construction law attorneys provide the following assistance with contractual matters:
The above list is just an example of a few areas where we can help. If you need any assistance with contracts on a construction project, please contact an attorney at our office, and we can help you sort through any issues.
Answering your Construction Contract Law Question
Issues almost always arise on a construction project. Sometimes Contractors wonder whether they are supposed to pay for the issue or whether someone else should be footing the bill. The contract almost always governs these situations.
That is why it is critical to know and understand the terms of your construction contract. On big construction projects the contracts can be quite extensive with voluminous amounts of legalese that can be difficult to understand.
Our construction law attorneys can sort through that dense language and advise you as to how you should best proceed on the project. Make sure that you know your rights if you’re working on a construction project, and consult with an attorney.
If you have a question about whether your contract is in compliance with Missouri law or whether certain clauses should be added or struck to protect your interests, contact one of our St. Louis Construction Lawyers today.
Other Types of Contracts Our Attorneys Draft and Litigate
Also, check out our article regarding 7 Provisions that Should be in Every Construction Contract
Consumer Protection in a Construction Law Case
Most people get their homes remodeled or perform some type of addition or other construction project on their homes. This is just a part of life, and it usually signifies moving up the ladder. However, most people do not anticipate that a contractor will destroy their kitchen or use poor craftsmanship when repairing a roof, which causes substantial water damage to the home.
In these situations, most people don’t know what to do. They spent most of their reserve cash on the remodel. They have never been involved in a lawsuit, and they don’t know what to do.
This article was written by a St. Louis Construction law attorney and was meant to address the issues described above and talk about some of the benefits that consumers have in a situation like that.
While it seems like a tough road, and perhaps will be, consumers do have certain advantages when a construction project goes south in Missouri.
1. Jury usually sides with the little guy & awards big damages
The U.S. Department of Justice (“USDOJ”) conducted a 2005 study on damage awards in cases in the state courts throughout the United States.
The USDOJ found that juries awarded an average of $74,000 in contract cases versus a petty $25,000 when the case was decided by a judge. http://www.bjs.gov/content/pub/ascii/cbjtsc05.txt
Many members of a jury decide a case based on emotion, regardless of whether it is a construction law claim or not.
They’ll ask themselves what would be a fair outcome, but they’ll also consider the financial positions of the parties involved. Often times, a construction company has a lot of money and can overpower a consumer.
The jury can see this and will account for this factor, usually empathizing with the little guy. This fact alone makes it extremely important to hire a well-versed St. Louis construction lawyer, so you don’t fall victim to the caprice of the jury.
A good construction lawyer will usually be able to preclude evidence that leads to the financial status of the company involved in the proceeding. To the contrary, a good construction law attorney who represents a consumer may be able to expose this fact and capitalize on it with the jury.
In any event, it is important to know that that when you deal with a jury, it is always a roll of the dice because of the emotional factor.
Construction companies have to ask themselves whether they are willing to bet the business on the litigation. A good lawyer can advise the construction companies as to the proper way to proceed in such instances.
To make an example of the contrary, a good construction law attorney representing a consumer will play the jury’s emotions by telling a captivating story, keeping the jury’s attention and swaying their emotions.
For those reasons, choosing the right attorney to represent your company, or you as a homeowner, is critical, especially if the stakes are high.
The next question you might ask yourself then, is how am I going to afford a good St. Louis Construction lawyer?
The answer is: your construction lawyer could potentially be free…
2. Attorneys Fees Could be Paid for Under the Missouri Merchandising Practices Act
The Missouri Merchandising Practices Act (“MMPA”) is an act in Missouri that allows for attorney’s fees to the prevailing party (at the court’s discretion).
R.S.Mo. 407.025, denominated the Merchandising Practices Act, states the following:
The court may, in its discretion, award punitive damages and may award to the prevailing party attorney’s fees, based on the amount of time reasonably expended, and may provide such equitable relief as it deems necessary or proper.
Beware and note, the phrase: may award to the prevailing party attorney’s fees…
First, the term may means discretionary, and in practice, the Court decides attorney’s fees under the MMPA. So really whatever the court believes the outcome should be.
Also, to the prevailing party: this makes it a high stakes game because the loser could end up footing two attorneys’ bills.
Missouri courts are supposed to take into consideration the purpose of the statute, which is typically lenient toward consumers, thus giving the consumers more incentive to pursue their claims against the contractors.
There’s also the underlying goal of reaching an equitable result, which means that the more egregious the case is–for example if a contractor tries to scam a consumer–the more likely the court will award attorney’s fees.
In order to pursue attorney’s fees, you first must have expenses from an attorney first–this is the difficult task, but you may be able to arrange a contract with the attorney to help you survive the litigation process from a financial standpoint (with the hopes or expectation that you will ultimately recover attorney’s fees).
3. Construction Law Cases under the MMPA are Fairly Easy to Prove
Usually a consumer case is fairly easy to prove in the context of a construction law proceeding.
That’s because there are four elements in a Missouri Merchandising Practices claim (consumer construction law claim), and many of them, by the the nature of the MMPA elements, are already proven (or stipulated to) in a construction law case.
The elements of the MMPA relating to construction law are roughly the following:
- The homeowner purchased merchandise from the general contractor
- The purchase was for personal, family, or household purposes
- The homeowner suffered an ascertainable loss of money or property
- The loss occurred as a result of an unlawful act under the Merchandising Practices Act.
Below, each element will be discussed:
A.The homeowner purchased merchandise from the general contractor
Merchandise is defined in the Missouri Revised Statutes section 407.010 as “any objects, wares, goods, commodities, intangibles, real estate or services”.
Services is the key word in the statute. Any general contractor hired by a homeowner is providing services. That alone satisfies the first element.
B. The purchase was for personal, family, or household purposes
This is an easy element to satisfy as well. One of the few difficulties that may arise is if the home upon which the general contractor is working happens to be a rental home. Otherwise, the work being performed on the home is clearly for personal, family, or household purposes.
C. The homeowner suffered an ascertainable loss of money or property
This element again is easily satisfied if the contractor screws up your home. The money that you spent on the renovation or construction project was basically just wasted on the contractor’s failed performance.
If the contractor did not cause a loss of money or property against the contractor, then the homeowner has no business bringing the lawsuit in the first place. Accordingly, suffering an ascertainable loss of money or property is yet another element that a homeowner can prove by showing that the work was not performed according to the contract or that it was not performed in a good and workmanlike manner.
Usually in a trial, this element can be proven through a subsequent contractor who came to perform the repairs or to provide an estimate regarding what it takes to repair the defective work.
D. The loss occurred as a result of an unlawful act under the Merchandising Practices Act
The following is a list of unlawful acts that can be committed under the Missouri Merchandising Practices Act:
- false pretense
- false promise
- unfair practice
- concealment of a material fact
- suppression of a material fact
- omission of a material fact
This is by far the most difficult element of the MMPA that a homeowner has to prove. Most attorneys will argue that defective work under a contract is merely defective work, and perhaps breaches the warranty that each construction contract imposes: the duty to perform the work in a good and workmanlike manner.
The lawyer will continue to arue: “without some conscious, intentional misrepresentation, all the homeowner has is a breach of contract claim.”
However, Missouri law has been pretty clear that in an MMPA claim, the conduct of the actor is what is the most important.
Thus, the rebuttal argument from opposing counsel (homeowner’s attorney) becomes the following: “the contractor made representations to the homeowner that he was competent and experienced in performing the renovation work, but the contractor either (1) did not have the experience and competence as represented or (2) committed an unfair practice by cutting corners to save money when the contractor knew the procedure to perform the work properly.
Accordingly, many homeowners, despite all odds seemingly stacked against them, do have a legitimate chance in a battle against a big construction company.
In order to fully protect these rights, you should always contact a competent construction law attorney in St. Louis.
Conclusion as to Why Construction Law Cases are Teed up for Consumers
This article told you 3 reasons why consumers may have an advantage in a Missouri construction law case.
- The jury usually sides with the consumer because they feel empathy for that person or for the family suffering from the shoddy work.
- Attorney’s fees are a potential threat to the contractor–beware, however, attorney’s fees could be imposed against the consumer, but such cases are rare
- Elements of the claim (MMPA) are fairly easy to prove
While it may seem like a daunting task for a consumer to fight against a big construction company, we have St. Louis construction law attorneys that will help you fight back.
We know construction law well, and we know how to protect consumers from these terrible situations.
Please contact our lawyers if you are faced with a situation like this. Our lawyers have handled numerous cases like this in the past, and we are happy to discuss your case with you.
General Background on the Missouri Prompt Payment Act
Are you a contractor that has not been paid on a construction project? Looking for an attorney to help you collect?
You might be able to get your attorney’s fees paid for, and you might be able to reap the benefits of a number of other perks that accompany a Missouri Prompt Payment Act claim.
The Missouri Prompt Payment Act is a group of statutes given the prompt payment title because of their ultimate purpose–these statutes were enacted to ensure that contractors on a construction project are expeditiously paid.
The legislature noticed that contractors’ or owners’ failure to make payment on a construction project was becoming a significant problem, and there needed to be a remedy.
Thus, the legislature incentivized payment by imposing various penalties.
This article was written to discuss a few of those penalties as well as the benefits for contractors that make a Missouri Prompt Payment Act claim.
1. Immediate Payment on the Project
As stated above, the goal of the Missouri Prompt Payment Act is to pressure the owner or general contractor into making payment as quickly as possible, so the contractor claimant receives the money to which s/he/it is entitled.
The statute sets forth the time at which payment should be made. The statute, R.S.Mo. section 431.180, the Missouri Private Prompt Payment Act, defers to the contract: “all persons who entered into a contract for private design or construction work after August 28, 1995, shall make all scheduled payments pursuant to the terms of the contract.”
In the event that those persons do not make payment, the statute provides a civil remedy that comes with other perks.
2. A Means to Pay for Your St. Louis Construction Law Attorney
Despite the incurrence of unwanted fees from hiring an attorney, you might be able to recover any monies paid out for attorney’s fees pursuant to Missouri statutes.
If you hire a St. Louis Construction Law Attorney, the statute provides a means to pay for him or her.
The statute states the following: “[t]he court may in addition to any other award for damages, award…reasonable attorney fees, to the prevailing party.” R.S.Mo. section 431.180.
Keep in mind that attorney’s fees are not guaranteed.
The statute merely provides the potential to collect attorney’s Fees. In any case, the potential to collect attorney’s fees creates leverage in the settlement of construction project disputes and that puts pressure on the owner or the non-paying contractor to immediately make payment.
If that entity or person fails to pay, they take the risk of potentially paying your attorney’s bill too.
3. 18% Interest Rate for Unpaid Work under the Contract
The Missouri Prompt Payment Act Provides for an 18% interest rate. This is an incredible rate considering the ordinary statutory rate in Missouri is 9%.
From the time a claim becomes liquidated (an undisputed amount that is due and owing), interest begins to accrue. This is a heavy burden for a non-paying owner or general contractor to foot if they wish to challenge the amounts because litigation could last for several years.
If the court or jury finds against the non-paying owner or contractor, they could also be footing a heavy bill as a result of the additional interest. For this reason, you should consult a competent St. Louis Construction lawyer to help you determine your rights and decide whether payment should be forthcoming or whether a party has legitimate grounds to withhold payment.
This article just told you about three benefits that a contractor can avail himself of through the Missouri Prompt Payment Act, when attempting to collect payment on a construction project.
The three advantages a contractor has by using the Missouri Prompt Payment Act are the following:
- The statute calls for immediate payment in accordance with the contractual terms thereof.
- The statute provides for attorney’s fees to the prevailing party–remember this is discretionary.
- The statute also provides for 18% interest on amounts due and owing, which is twice the normal Missouri statutory interest rate.
For all of the above reasons, the Missouri Prompt Payment Act can be a very effective tool for contractors who are attempting to collect on a construction project.
Because litigation can be a very complex process, contractors that need help collecting for work performed should contact a St. Louis construction law attorney for assistance.
There are numerous ways to collect payment if you are a contractor owed on a construction project in Missouri. This article will tell you the five most commonly used methods of collecting when an owner or general contractor fails to pay on a project.
1. File a Mechanic’s Lien
The first, and perhaps most powerful, way of collecting on a Missouri construction project is by filing a mechanic’s lien statement. Most contractors will attempt to do this on their own. While a handful of the do-it-yourself liens that are filed may withstand attack, the majority of the mechanic’s liens filed pro se can easily be vitiated with the basic mechanic’s lien defenses.
See the article called 4 Defenses to Mechanic’s Liens in Missouri for more information on defending or properly filing a lien in Missouri.
2. Make a Bond Claim
Not all projects have bonds, but when a bond exists, it acts almost as insurance on the project. Public works projects almost always require a bond because a governmental entity is the owner on the project, and it would incredibly debilitate that governmental entity’s credibility and image if a contractor were able to lien up the government owned property.
For example, if an electrician performs work on the city hall building and is not paid for the work performed, the electrician would put a mechanic’s lien on city hall. In order to prevent
3. Make a Breach of Contract Claim
Even if your lien is invalid or you did not properly preserve your lien rights, you still likely have a claim for breach of contract on a construction project. Usually construction projects are of a significant enough magnitude to warrant a written contract.
However, occasionally contractors who are trying to keep the job informal or are “old school” will not sign a written contract that lays out the scope of the work and/or terms and conditions of the contractual agreement.
Are oral contracts enforceable on a construction project?
As a lawyer, a question that we are often asked is whether an oral contract on a construction project is enforceable. The general answer is yes. There are certain contracts that are required, by Missouri law, to be in writing.
4. Make a Quantum Meruit Claim
Quantum meruit basically means whatever is deserved or whatever it’s worth. It’s a claim based in equity as the policy behind a quantum meruit claim is to effectuate a fair outcome for the parties. For example, if work is performed for someone, it is only fair that the person receiving the work, pay the fair value for that work.
A quantum meruit claim is secondary to a contract claim. Some lawyers use it as a catch-all in the unlikely event that the court finds the contract invalid. Although there would no longer be a valid claim for breach of contract, fairness would dictate that the contractor should be paid in a manner commensurate with the amount of work performed.
5. Make a Missouri Prompt Payment Act Claim
Last but not least, and perhaps the biggest hammer in collecting on a construction law case: The Missouri Prompt Payment Act. This is one of the best ways to collect because it comes with interest at a rate of 18% per annum.
That means 1.5% per month. The statutory interest rate in Missouri is 9%, so this is double the regular statutory rate.
In addition to the elevated interest that a claimant can obtain, the claim also comes with reasonable attorney’s fees.
This is a major threat for a non-paying contractor or owner as they not only risk paying the full amount for the work performed, there is a significant amount of fees and interest racking up.
The Missouri Prompt Payment Act provides for certain amounts of time in which the contractor has to make payment of an undisputed amount.
If the owner or contractor does not make payment within that time period, interest will start to accrue (assuming the claimant has complied with all documentation submission requirements as well as the other contractual obligations.
See 3 Benefits the Missouri Prompt Payment Act Provides Contractors for a more detailed discussion of the Missouri Prompt Payment Act.
There are a number of ways to get paid on a construction project. You just learned about five different ways above.
The following is a recap of the different methods a contractor or subcontractor can use to get paid on a construction project:
- File a mechanic’s lien
- Make a bond claim
- Make a breach of contract claim
- Make a quantum meruit claim
- Make a Missouri Prompt Payment Act claim
You’ve learned the starting points for collecting, however there are certain procedural obstacles and technicalities when pursuing any of these claims. You would be well-advised to consult an attorney if you plan on utilizing any of these methods.
If you have more questions about collecting for work performed on a construction project, please feel free to contact our St. Louis construction law attorneys with questions.
Construction Law Explained
No country in the world can prosper without the proper infrastructure.
Infrastructure refers to the fundamental need of a network of roads, bridges, telecommunications, water supply, airports and airways, hospitals etc. which helps the economy function.
Construction is the industry that plays a key role in providing this infrastructure.
Construction itself can be broadly defined as the process of planning, designing, financing, developing, and building something (whether that be a house, road, or dam).
In today’s age, the Construction Industry accounts for 6 to 9 percent of the total GDP of all developed countries. There is a lot of money being exchanged in the construction law industry, and for that reason, its important to know your rights on a construction project.
This article was meant to provide a general discussion about construction projects in general
Components of a Construction Team
Construction can sometimes be a complex process. It requires the involvement of a whole team of people working together.
Some think it just involves engineers and architects and a contractor. However, its not limited to these few people. There’s a whole human resource behind it.
There are numerous people that make up a construction team, which include:
- project manager,
- construction engineer,
- finance manager, and
- a construction lawyer.
My role as an attorney is to protect contractors rights, so rather than discussing all the components of a construction project, this article and the other articles on this website will hone in on the legal aspects, contractual negotiation and disputes, collection efforts, and common pitfalls that occur during construction projects.
The law deals with nearly every matter that touches a construction project.
The following are a few examples of commonly litigated construction law matters:
- disputes regarding the compliance with specifications and design in the construction of a building,
- the duties and obligations of the electrician pursuant to the contract,
- construction defect claims, breach of contract, and/or
- negligence on the project either in failure to comply with the contractual specifications or negligently causing injury on the project.
While the range of coverage regarding construction law is quite expansive, it makes the most sense to first discuss a little bit about construction contracts as that creates a foundation and governs the interrelationship between the parties on the project.
What Laws Govern Missouri Construction Contracts?
In Missouri, a construction contract is governed by Missouri statutes and case law but is also influenced by the Supreme Court of the United States’ decisions. The Supreme Court of the United States’ decisions provide the basic framework of the law and the Missouri statutes and cases give guidance regarding more specific issues that arise in construction, including, but not limited to:
- Construction Contracts
- Substantial Compliance vs. Material Breach of a Contract
- Privity and the interrelationship between contractors
- Design Professionals in the event of Negligence
- Breach of Warranty, both expressed and implied
- Unjust Enrichment
- Tortious Interference with contract
- Strict Liability Claims
- Indemnity Claims
Tip: Due to the complexity of a construction project and the potential pitfalls that could arise from nuances in the above law, you should always contact a reliable St. Louis Construction Lawyer before commencing any construction project in Missouri.
The attorney will walk you through the proper procedure and ensure that your contract has the necessary provisions in it to protect your rights.
Below are 3 important facets in a Missouri construction project: Time, Change & Termination:
1. Changes to the Construction Contract:
There is usually a provision in the construction contract which deals with changes or modifications to the scope of work or condition. If there has to be any change in the scope or price of the project, the owner must approve it prior the start of the construction.
See C.P. Jhong, Annotation, Effect of Stipulation, in Private Building or Construction Contract, That Alterations or Extras Must Be Ordered in Writing, 2 A.L.R.3d 620 (1965).
Article 7 of AIA Document A201-1997, for example, contains three classifications of amendments which each differ slightly:
- Change Orders
- Construction Change Directives.
- Minor Changes
This website briefly explains these concepts, but you should contact a St. Louis Construction Lawyer to learn more about your contractual rights in case a change is made to the construction contract.
2. Time of Performance:
If in the construction contract, no completion time is mentioned and a dispute arises regarding delays or timely completion, Missouri law expects that the construction will be completed in a reasonable time. See ArtCraft Cabinet, Inc. v. Watajo, Inc., 540 S.W.2d 918 (Mo. App. W.D. 1976). Failure to do so may give rise to damages claims from the party in the tier above on the construction project food chain.
A good construction contract, like AIA Document A201-1997, General Conditions of the Contract for Construction, uses the time between the commencement of the work to the time of substantial completion as the total amount of time for completion allowed for the contractor, with very few exceptions.
A good construction law attorney will include this type of provision into the contract, accounting for any anticipated delays or hiccups in the project.
3. 3 Ways a Construction Contract Can be Terminated:
Termination of a construction contract can occur in three ways at least:
- Termination for convenience without the fault of any of the parties.
- Termination by mutual agreement.
- Termination by performance one party because the material breach of the other party.
Before terminating any contract, it is important to know your rights. You can avoid exorbitant expenses if you follow the proper procedure before terminating. In order to know your rights and whether you have the legal right to terminate a contract, you should always consult with an experienced construction law attorney prior to making any drastic moves.
Any party who wishes to start a construction project in Missouri, should first devise a proper plan. This plan should include hiring a number of different people for the project, including
- a project manager,
- an architect,
- construction engineer,
- St. Louis Construction Lawyer (if it’s a Missouri project),
- finance manager.
There are so many moving parts on a construction project that its difficult to try to handle the legal aspects of it while juggling the other tasks. Contact a knowledgeable St. Louis Construction Law attorney to help you with contract negotiations, collecting on a job, or defending a consumer lawsuit.
If you hire an attorney, they will prepare a defense plan and it will increase your chances of success in the litigation. Or, at the bare minimum it will create leverage to resolve the dispute.
As we all know a significant amount of disputes arise during a construction project. If you retain an attorney before the dispute arises, you may be able to prevent it from happening in the first place. “An ounce of prevention is worth a pound of cure.”
Don’t let that phrase haunt you when your in the middle of an expensive lawsuit for something that a Construction Law attorney could have prevented by including a simple provision in the contract. Get your contracts reviewed by a local St. Louis attorney, so you’re in compliance with the applicable Missouri and St. Louis construction law.
If a dispute ever does arise, and the project is in Missouri, you should immediately contact a St. Louis Construction Lawyer who can guide you through the legal aspects of the contract.
St. Louis Construction Lawyer Shares General information about Mechanic’s Lien Rights in Missouri
Is someone withholding money from you on a construction project?
The Missouri Mechanic’s lien statutes provide broad protection for numerous professions involved on a construction project, including registered architects, engineer surveyors, laborers, prime contractors, subcontractors, suppliers of materials, equipment lessors, and even landscaping service providers.
The Missouri Mechanic’s lien statutes carve out these rights, but contractors have to strictly comply with the statutory requirements set forth therein or they could risk potential vitiation of their lien by the property owner.
In order to better guide contractors attempting to collect money on a construction project, I have compiled information about Missouri Mechanic’s liens that every contractor should know before filing:
1. Mechanics Liens Must be Filed within 6 Months
In Missouri, a mechanics lien must be filed within six months from the last day materials or labor was provided on a construction project.
This date is critical to lien claimant because the right to file a Mechanic’s lien is created by statute, and the court requires strict compliance with the statute in order for a lien claimant to avail himself/herself of the statutory protections of a mechanic’s lien.
2. Where to file the Mechanic’s Lien
Recorder of Deeds Office or Clerk of the Circuit Court?
Some people get confused and file the lien in the wrong place. The mechanic’s lien statement is not filed with the recorder of deeds office as some believe.
The notice of intent to file a mechanic’s lien is filed with the recorder of deeds office in the county where the project is located. This only applies if the claimant is a subcontractor and a notice of intent is necessary to be filed. Liens have certain requirements that vary depending on the status of the contractor and depending on the status of the person/entity with whom the contractor has contracted. For those reasons, it is important to contact a St. Louis Construction Law attorney to assist you with properly filing your mechanic’s lien.
However, the mechanic’s lien statement is filed with the clerk of the circuit court in the county where the project is located. The filing of the lien is similar to opening a new case in that the clerk will give you a mechanic’s lien number with which it is recorded in the court’s filing system. However, a lawsuit must still be commenced within 6 months in order to enforce the lien.
3. The Mechanic’s Lien Must Include Correct Legal Description
A legal description needs to be included in the lien. To obtain a legal description, you may need to seek the assistance of an experienced St. Louis construction lawyer who is qualified to help with this. Though some exceptions can be made for partially described properties, it is best to have an attorney confirm that you have the full and correct legal description to avoid any issues with the validity of the lien.
There are certain processes through which a construction law attorney can obtain the proper legal description as well as a chain of title report, or what is often used in the construction law industry, an ownership and encumbrance report.
4. Mechanic’s Liens in Missouri must be Notarized
Before filing a mechanic’s lien statement, it needs to be notarized.
Often times a mechanic’s lien can be notarized at your bank, but not all banks will notarize a document unless it has a proper notary block contained therein.
To avoid unnecessary trips back and forth to your bank and to ensure that the notary page of the lien is properly prepared the first time, you should contact a St. Louis Construction Lawyer to assist you with the preparation of the same.
5. The Pre-lien Notice Depends on the Claimant
For subcontractors a notice of intent to lien must be filed. This has to be filed ten days before the mechanics lien. Any other preliminary notice depends on the project and the status of the participant in the project.
- General Contractors (excluding architects) must give what is typically called 429 notice, before receiving payment from the property owner.
For a discussion of 429 notice, see the Frequently Asked Questions Answered by a St. Louis Construction Lawyer.
The nuances in notice drastically vary, and its important to consult a construction law attorney before attempting to file a lien because it could be the difference between collecting thousands of dollars or watching your business go under from lack of working capital.
In the state of Missouri, the failure to provide appropriate preliminary notice or notice of lien rights may lead to the vitiation of your lien.
Fees Should Not Be Included in a Mechanic’s Lien but May Be Awarded
Missouri does not allow any additional fees be added to a mechanics lien such as consequential damages, interest, or attorney’s fees.
The lien is limited to unpaid labor, material and/or equipment supplied for the project, customary profit and overhead.
Just and True Account of Money Owed
A ‘just and true’ account of the money owed is a required element of the lien. This can be a lump sum for general contractors, but for subcontractors an itemized list is needed that should include labor and/or materials furnished and unpaid. Any good construction law attorney will advise you to include an itemized list regardless of your contractor status.
Note: Attorney’s fees and interest are generally awarded to the lien claimant if they are successful.
6. Mechanic’s Lien Priority Depends on Pre-Existing Encumbrances
Generally all participants in a construction project have equal lien rights with very few exceptions. However, these parties do not have priority over many pre-existing liens, such as loans or mortgages on the property.
They do, however, have priority over subsequent encumbrances (if there was no previously recorded lien on the property at the beginning of the project).
7. Always Contact a Missouri Construction Lawyer to Ensure Statutory Compliance
Mechanic’s liens are creatures of statute and have rigid statutory requirements. An experienced St. Louis Construction lawyer can help you navigate through the required elements and assist you with filing a proper mechanic’s lien.
Please note that the foregoing tips are all generally speaking. There are some nuances in the law that differ depending on whether the lien attaches to the land or the building. The differences in priority are discussed in the Construction Law FAQs Answered by a St. Louis attorney.
The bottom line is: in order to properly assess your case, you should always consult with a St. Louis Construction Lawyer before filing a mechanic’s lien.