Procedures for Filing Mechanic’s and Materialmen Liens in Kentucky
Mechanic’s lien statutes in Kentucky are authorized by the Kentucky Revised Statutes.
The statutes allow contractors, subcontractors, laborers, and materialmen to place liens upon the property worked upon, or for which they provided material to.
The Kentucky legislature has intended to extend lien rights to all people who have contributed either through their labor or their materials to the improvement on the property.
Thus, the mechanics and materialmen lien statutes are a great weapon for potential mechanic’s lien claimants in their efforts to collect money if they are not paid.
[For example, the lumberyard can look to the property owner where its lumber was delivered, in addition to the builder, in its effort to collect its money.]
The right to look beyond your own contract to the fruit of your labor or material supplied for payment is unique to the construction/supplier industry. If we didn’t have this unique right, it is doubtful many suppliers would extend credit so freely and this right is likely the backbone of the construction industry.
Kentucky’s mechanic’s lien laws are very precise and unusual. Kentucky courts have repeatedly ruled that anyone trying to claim a mechanic’s lien must strictly follow the procedural steps necessary to create the lien. If you don’t follow the procedures, your lien will more than likely be no good and invalid.
The statutes are technical and, in many instances, must be followed to the letter to insure that you have a properly filed and perfected lien.
TIMING of filing of the lien and NOTICE to the owner are both important and cannot be altered or waived.
Kentucky’s mechanic’s lien laws are set forth in Chapter 376 of the KRS. KRS 376.010 through KRS 376.110 govern the various forms of liens against privately owned land. KRS 376.195 through KRS 376.260 govern the rights of lien claimants where publicly owned land is concerned. The private property lien statutes, and public property lien statutes are distinct and different and don't overlap each other.
The information required, the filing requirements, and the location of the lien filing are very different based upon whether or not your labor or materials involved private or publicly owned land.
Also, the timing of filing the lien varies in a privately owned situation, if residential property is involved.Private Construction Projects
- Who has lien rights in Kentucky?
Answer - Any one who contributed improvement and labor to land.
Kentucky’s statute KRS 376.010, in short, grants a lien on real property in favor of anyone who can show four (4) things:
- That labor was performed or material supplied.
- For the erection, altering or repairing of an improvement on land.
- That it was supplied pursuant to a contract or by consent of the owner, contractor, subcontractor, architect or authorized agent.
- That material or labor was incorporated into the improvement on the land.
The issue of a contract or consent of the owner is an important element to establish one’s right to a mechanic’s lien. The problem of consent of the owner arises when the party contracting for the improvement to land does not own the land…(tenant, life tenant, buyer/vendee under land contract). One must prove that the owner either consented or had actual knowledge of the improvement. If not, then the lien claimant is not entitled to a lien on the owner’s property.
- There are Two (2) Classes of Lienholders:
- Those who dealt directly with the owner, and
- Those who dealt indirectly with the owner.
The above distinction is important because certain required notice to the owner periods of time must be met in order to perfect a lien.
There are Three (3) Different Notice Periods in Kentucky.
- Preliminary Notice
- Notice To Owner
- Final Notice (or filing your Statement of Lien)
- Preliminary Notice
- Statement that claimant has furnished or expects to furnish labor or materials to property.
- Full amount of claim that may be asserted.
- A description of the property to be liened.
- Name of the owner of the property to be liened.
- Whether labor or materials were performed or were furnished under a contract and with whom.
- Notice To Owner.
- on claims less than $1,000, notice must be given to owner within seventy-five (75) days after last item of material or labor was furnished.
- on claims, more than $1,000, notice must be given to owner within one-hundred twenty (120) days after last item of material or labor was furnished.
- Statement of Lien (Final Notice)
- Name and address of lien claimant.
- Amount due (with all credits and set offs).
- A description of the property to be liened. Statue says “sufficiently accurate to identifying it”.
- Name of the owner of the property to be liened.
- Whether labor or material were furnished under a contract with owner, contractor or subcontractor.
As indicated, it is a preliminary type of notice, which it is filed in the Office of the Clerk of the Kentucky County in which the real property is located.
This preliminary notice does not create a mechanic’s lien, but merely protects a mechanic’ lien holder against claims of priority asserted by a mortgagee (bank) or other lienholder or person having an interest in the property.
The Preliminary Notice Statement must contain the following five (5) pieces of information:
If you properly file this Preliminary Notice Statement prior to the bank recording its mortgage or prior to the recording of other types of contract liens, then your lien will be first (have priority) over the mortgage or other lien.
Remember, this Preliminary Notice Statement is not required to be filed to have a good lien, but only to give your claim priority.
In reality, filing a Preliminary Notice is not practical because of the timing involved. In most cases one is in the process of performing labor or furnishing materials and who in their right mind would file a Preliminary Notice either prior to or during the improvement. Most suppliers or materialmen usually wait until after the job and invoicing before even protecting their lien rights.
Lien claimants who have not contracted directly with the property owner or his or her authorized agent must first give written notice to the property owner of his or her intention to claim a lien against the owner’s property before filing a lien.
Note: The contractor or subcontractor of the owner is considered the “authorized agent” of the owner for purposes of sending this notice of intent to file a lien.
If possible, send the notice to both the contractor, subcontractor and owner to let them know you have not been paid and intend to file a lien if you are not timely paid.
The Notice periods for sending this written Notice to the Owner are as follows:
Note: For purposes of calculating your notice time, count out 75 or 120 days from last day material or labor was supplied to a job.
Big Exception: If you are dealing with an owner-occupant of a single or double family dwelling (a person who uses the property as his or her primary residence (home) and you have not contracted directly with the owner, (i.e., you supplied concrete to the concrete finisher for a new driveway for the owner) than, if you want to lien the property, you have forty-five (45) days (much shorter notice period) after the last item of material or labor is furnished, to give notice to the owner of your intention to claim a lien against his or her property for an unpaid bill. However, if the owner of a single family dwelling has, prior to receipt of the Notice of Intention To Claim a Lien, already has paid the contractor or subcontractor for the work or materials, you are out of luck… You no longer have any lien rights against the dwelling.
Note: When dealing with residential property which is occupied by owner as his or her primary residence, and you have not contracted with him or her, you must act quickly (within 45 days). You must notify owner within that short 45 day time period that you have not been paid and if the owner has already paid the contractor, you have lost your lien rights.
Kentucky statute provides protection to the owner of a single family dwelling and does not require him or her to have to pay twice if he or she has not been notified by materialmen or laborer that he or she hasn’t been paid within 45 days and/or has paid the contractor for the work done.
This is final notice which must be given by a lien claimant in order to maintain his or her lien rights against the property.
This statement must be filed in the County Clerk’s Office, in the county where the building or improvement is located, within six (6) months from the date you ceased furnishing labor or materials to the project (i.e., the last day on January 12, 2017, must file lien statement by July 12, 2017).
The Statement of Lien must contain the following six (6) pieces of information:
This Statement of Lien must be signed, “subscribed and sworn to” before a notary public and recorded in the county real estate records as a lien against the property.
Note: Statement signed by lien claimant or by someone on his or her behalf.
Important Detail - A copy of the Statement of Lien must be mailed to the property owner “at his or her last known address”, within seven (7) days of the filing of the statement with the County Clerk’s Office. If you don’t mail the Statement of Lien to the property owner within seven (7) days of filing, your lien is dissolved.
When does lien attach to Property?
Answer - A valid mechanics lien attaches to the property at “the time of commencement of the labor or the furnishing of the materials.” But, if you don’t comply with the Kentucky’s statutory notice periods (Notice to owner 75 & 125 days and file Statement of Lien in the County Clerk’s Office, within six (6) months you lose your lien rights).
What Qualifies as Last Item of Material or Labor Furnished by Lien Claimant for Purposes of Calculating the Time for Sending Notice and Filing Lien?
This question is always debated.
For Material Suppliers - if the material was needed to complete the job, then the date of sale is the basis for calculating the time for filing a lien or sending notice to the owner. (Rule of thumb is need)
For Contractors and Subcontractors - if the work is needed to complete the project, then legitimate last work can be used to as a good basis to calculate the time. (Rule of thumb is completion)
Punch list work is usually a very good basis of calculating notice time and lien time. In such a case, both the owner or contractor is admitting that the work is not complete and they want subcontractor back on the job to do certain work.
Warranty work or materials delivered to replace defective material that was still under warranty won't support a basis of last day on job…because by its nature, warranty work is an admission on the part of the subcontractor/materialman this his or her or work was actually completed.
Duration of Lien and Enforcement
How long does valid lien last in Kentucky?
Answer - 12 months from filing of the Statement of Lien.
A lawsuit to Enforce the lien in the Circuit Court where the lien is filed within twelve (12) months of the filing of the lien.
This lawsuit to enforce the lien is similar to a foreclosure action, you must name the owner of the property and all other interested parties as party defendants. Ususally will require a title search to identify all interest parties.
If a lawsuit is not brought within twelve (12) months, the lien is automatically dissolved and is no longer valid.
Bond To Release Lien
Bond must be executed before County Clerk in which lien was filed. Bond must be for double the amount of the lien claim, with good sureties. The bond is then substituted as security for the lien. [Land owners can substitute bond as security for lien claimant’s lien.]