When can a subcontractor file a lien?

When can a subcontractor file a lien?

Under Tennessee law, a subcontractor is considered an indirect lien claimant since he or she typically does not have a contract with the owner of the property. Even though a subcontractor does not have a contract with the owner, he or she might still have lien rights. To determine if a subcontractor has lien rights, you must consider the following: Did the subcontractor contribute to an improvement in real property? Is the improvement part of a residential or commercial project? Has the subcontractor taken the necessary steps to ensure he or she has not lost whatever lien rights he or she may have had?

Improvements

In most situations, this is obvious. The subcontractor has either performed services or delivered materials as part of a construction or renovation project that permanently alters or “improves” the real property.

Residential or commercial property

For subcontractors, Tennessee law treats residential projects and commercial projects differently.

Residential projects

Generally speaking, subcontractors do NOT have lien rights for improvements made to residential property. One exception in which a subcontractor does have lien rights against residential property is when the owner is acting as the general contractor. In that situation, the subcontractor has a direct contract with the owner/general contractor. As an aside, a subcontractor may have a cause of action against an owner that is acting as the general contractor even if their contract is not in writing.

Commercial projects

Subcontractors have lien rights for improvements to commercial property. However, they must follow specific statutory requirements or they risk losing those rights. Subcontractors must send a Notice of Nonpayment to the owner and general contractor to keep their lien rights. Tennessee law has strict requirements for Notices of Nonpayment. Subcontractors must include very specific information and must send their Notice timely otherwise they risk losing their lien rights. After sending a timely Notice of Nonpayment with all the required information, subcontractors must then send a copy of their Notice of Lien to the owner and general contractor too. Once both the Notice of Nonpayment and Notice of Lien have been timely sent, a subcontractor can file his Notice of Lien.

Enforcing a valid lien

To enforce a valid lien claim, a subcontractor must file his or her lawsuit within ninety (90) days of their Notice of Lien. If they fail to file an appropriate lawsuit within that statutory time frame, he or she will lose his or her lien rights.

If you are dealing with a general contractor that has not paid, you need a construction lawyer Memphis trusts to help you through the process.