- July 17, 2019
- All Louisiana Issuing Offices
- LEGISLATIVE UPDATE - ACTS OF THE 2019 LOUISIANA REGULAR SESSION INCLUDING LIEN LAW REVISIONS
The following are summaries of acts passed during the 2019 Louisiana legislative session which are of interest to the title insurance industry. All acts are effective now, unless otherwise noted.
All persons applying for a title insurance license from the Commissioner of Insurance must maintain the accuracy of such application and notify the Commissioner of any changes.
WHAT YOU SHOULD KNOW
It is the responsibility of the license holder to notify the Department of Insurance of any changes to the information provided on the license application. This information may include, but is not limited to, mailing address, email address, phone number, corporate affiliation, etc. The consequences could range from fines to a suspension of the license.
ACT 82 (effective January 1, 2020)
All non-resident producers must maintain in good standing a current resident producer in his/her home state.
WHAT YOU SHOULD KNOW
It is the responsibility of a non-resident license holder to notify the Department of Insurance of any change of address and to maintain a valid resident license in his/her home state.
This act amends portions of Title 47 relative to tax sales by adding an additional notice to the “tax notice party” within ninety days of the expiration of the redemptive period, that the property has been sold and will not be able to be redeemed after the expiration of the redemptive period. This notice must be by certified mail, and if returned, the tax collector must show a reasonable effort to notify, by sending a first class letter in the mail and three of the following: perform a computer search for other properties owned by that person to locate the person, or contact the assessor to see what he knows, or examine the mortgage and conveyance records to find the person, attempt domiciliary service, or attach a notice to the property. After the tax sale, the tax collector within ninety days must be notified of the sale by certified mail or commercial courier.
WHAT YOU SHOULD KNOW
Notice requirements for tax sales continue to be very complex, and the required documentation to be maintained by state officers to meet these meticulous requirements are also very complex. The title examiner may rely on documents showing adequate searches, but cannot presume a search by a sheriff or other person is adequate when there are no records.
A minor under 16 cannot consent to marriage, nor may such a minor enter into a pre-nuptial agreement. A minor 16 or 17 years old cannot marry a person greater than three years their elder. In all cases of a minor 16 or 17 getting married, the marriage must be authorized by a Court of competent jurisdiction, by an ex parte order.
WHAT YOU SHOULD KNOW
Remember that minors can be eligible for marriage, but still unable to execute a pre-nuptial agreement, as they are not emancipated until the moment of marriage.
THE BEST FOR LAST - ACT 325 OVERVIEW, AN OVERHAUL OF CONSTRUCTION LIEN LAW (effective January 1, 2020)
Act 325 overhauls Louisiana law concerning privileges against immovable and claims against owners, contractors and sureties. It revamps the requirements for filing and the ranking of privileges. Certain terms are redefined, the time limits are changed and the methods of cancellation of liens and lis pendens are modified. Notice provisions are also amended, and the statutory scheme with regard to headings and section numbers have been adjusted. The bill was submitted by the Louisiana Law Institute, which also added extensive notes to the changes. Act 325 comes with extensive Law Institute notes following each section. It is recommended that examiners/agents print up the entire act in order to have these explanatory notes available.
R.S. 9:4801 Improvements of immovable by owner
“Professional Consultants” engaged by the owner have lien rights. This new phraseology (i.e. the use of “Professional Consultants” is intended to be a more succinct way of listing those with lien rights, instead of a long serial list. According to the Redactors’ notes, it was not the intent to expand the list of claimants. These terms are later defined in section 4810. However, the use of the word “immovable” in the revised section was intended to expand the type of lienable work to include work on movables owned by a person other than the owner of the land, such as those who work for a lessee on a building owned by the lessee. Terminology is simplified by this section, by the use of “professional consultants.” These consultants have privileges arising from a direct contract with the owner. Because their work is not evident by site inspection, the ranking of their liens would be from the moment of filing.
R.S. 9:4802 Improvements of immovable by contractor
A (5) was amended to use the phrase “Professional Consultants” also to describe those engaged by the contractor. Language was added to subparagraph F to clarify that a contractor, who pays his subs or suppliers under this section, may not subrogate to their claims against the owner or assume their right to lien the property. (Note: an owner can require the contractor to post an appropriate bond and avoid claims under this section.) These 4802 consultants are those hired by the contractor.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTIONS 4801 AND 4802
These two sections define the potential “privileged group” of persons entitled to secure their rights in connection with work done on real estate, whether hired by the owner directly or hired by the contractor. Section 4802 has special provisions as to notice to the owner, since 4802 people did not contract directly with the owner. These new sections do not change the conceptual basis of liens and privileges, but do simplify the language.
R.S. 9:4803 Amounts secured by liens and privileges
This section was amended so that the liens under 4801 and 4802 do not secure attorneys’ fees in general. However, other parts of the lien law allow attorneys’ fees. It also prevents a “Professional Consultant” individually to file a lien, if the work was done through a juridical entity.
R.S. 9:4804 Notices required
This section is all new and tries to gather in one place the notice requirements. Subsection A requires notice of employment within 30 days of being hired by professional consultants who do not have a direct contractual relation with the owner. Those with a direct contractual relationship need not give this notice. Subsection B (1) requires lessors of movables to give notice to both the contractor and owner within thirty days of the leasing if the notice of contract was filed. If notice is late, than any lien will cover only rental after the notice is given. Subsection B (2) allows an owner to request of a lessor of movables a list of movables on the site, which request must be answered within fifteen days. Subsection C provides that if a notice of contract has been properly filed, the seller of a movable to the contractor has seventy-five days in which to file a lien (with appropriate notices), running from the date of the delivery of the movable.
R.S. 9:4806 Owner defined; interest affected.
This section has been amended in its Subsection C to make it clear that the lien rights against a lessor or servitude owner will be “inferior and subject to all rights of, and obligations owed to” the fee owner. Subsection D makes it clear that lien rights against a tenant are inferior to the landlord’s right to dissolve the lease. Note that case law does not allow an owner to escape liens by using a “strawman lessee” to act as a contractor.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTION 4806
The title examiner/agent must regard work ordered by a person with dubious ownership rights as potentially lienable. Case law suggests that under theories of unjust enrichment, a trier of fact would be inclined to hold the title insurer liable to unpaid workers and suppliers if at all possible.
R.S. 9:4807 Contractor, general contractor, subcontractor defined
No substantial changes in definitions are made, only stylistic changes.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTION 4807
The distinctions between general contractor, contractor, and subcontractor are important in the litigation which follows non-payment, but not important from the point of view of the title examiner/agent as to the right to file liens. All of these must be presumed to have lien rights.
R.S. 9:4808 Work defined
Subsection B has been amended to delete the requirement to file a bond in order to have a contract which is filed to be deemed a separate work. Subsection C considers preliminary site work to be a separate work, unless performed by the same contractor who is building the building. However, the title examiner must be conscious of the fact that such will likely render a no-work affidavit unavailable, thus requiring the title to be reviewed as one of broken priority.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTION 4808
Recall, that at the outset of this discussion of liens, liens arise with what is defined as the “Work.” The definition of work will be important in issues of ranking, and in prescriptive periods. Generally, those who physically work on the property, or deliver supplies to the property get a retroactive ranking to the moment their “Work” started. Subsection C of this section is important for attorneys for Owners, as it allows for the artificial division of a single and continuous project into several “Works.” Preliminary preparation could be a separate Work if not done by the same contractor.
R.S. 9:4809 Substantial completion and abandonment of work defined
This Section has been totally rewritten, but does not make any change from the title examiner’s point of view.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTION 4809
Work is “substantially complete” when the last work is done and materials delivered to the area described by a filed termination of work, or when the owner accepts the work and occupies it, or if the work is abandoned. Minor or inconsequential matters may still be remedied. This section is most important as it determines the commencement of the lien period.
R.S. 9:4810 miscellaneous definitions
This section is important as it defines terms used in these statutes.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTION 4810
A description of property in a contract must be sufficiently clear that if used in a mortgage, would create a mortgage. The definition of immovable is more expansive than in the Civil Code in general, as it includes here structures not owned by the land owner, but by another, such as a tenant. From the examiner’s point of view, a lien with an incomplete description is still a matter which must be cleared up as it is suggestive of litigation. Although the description requirements have been tightened up, you should regard a filed lien with an inadequate description as suggestive of litigation.
R.S. 9:4811 Notice of a contract with a general contractor to be filed
Such a notice must be filed before the work commences and must contain “a complete property description.” An insufficient description is to be considered prima facie proof of actual prejudice to a claimant or other person requiring rights in the immovable. A contractor whose contract exceeds $100,000 cannot claim a privilege if his contract is not properly filed.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTION 4811
The title examiner must read the contract and its description to determine the length of the lien period, and in the case of doubt presume to longest possible, i.e., seventy days. This section also provides for the cancellation of a contract, with the request of the owner and the contractor, if no work has started. Note also, that the owner who insists on a statutorily sufficient bond can escape liability for all liens. (Although the filing of any lien is still suggestive of litigation).
R.S. 9:4812 Bond required; terms and conditions
If a contract exceeds $100,000, the bond (we are talking about a “payment bond”) furnished by the contractor must be issued by a licensed surety, and the amount must be the amount of the contract. Any change in the contract to the prejudice of the surety will not reduce the surety’s obligation to third parties, but the owner shall be responsible for such prejudice.
R.S. 9:4813 Liability of surety
The amendment to this section clarifies that a surety which pays a claimant subrogates to the claimant’s contract right, but not to the right of a privilege against the title.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTIONS 4812 AND 4813
While bonds and sureties are helpful in getting underwriter permission in a broken priority situation, these do not automatically allow for insuring over potential liens. Generally, your underwriter will want credit reports, financial statements, a general lien search in the names of all parties, title agent’s previous experience with any parties, construction budgets, payments already made, lien waivers, and maybe copies of checks.
R.S. 9:4820 Privileges; effective date
Subsection A states that “Work” begins with placing materials or conducting work on the “site.” “Site” is newly defined as the “area within the boundaries of the property.”
Subsection B allows for the suspension of work for thirty days, after which the restarted work would be considered a new “Work.” A claimant for work done before the suspension has 60 days from the date of the suspension to file a claim. The title agent’s dilemma with this scheme is that the start of a new work does not get the insurer out of the lien period for the old work.
Subsection C allows a mortgage holder to rely on a “no work” affidavit of a qualified inspector if the inspection occurs and the affidavit is filed within four days before or after the mortgage. Insofar as the rights of the person for whom the affidavit is made are concerned, the affidavit “shall be deemed true at the time of the inspection and to remain true at the time of the filing of the mortgage.” The correctness of those facts may not be controverted to affect the rights of that person. Rights of professional consultants as to the mortgagee in this section rank from the date of the filing of their lien. Rights of a contractor and those who do work for the contractor date from the filing of the contract. (Ergo: The contract must be filed after the mortgage for the mortgagee to have priority).
R.S. 9:4821 Ranking of privileges
This section was entirely rewritten. The redactors state in the comments that the section “makes no substantive change.” Taxes, local assessments, demolition liens, blighted and abandoned property liens, grass liens will be superior to mortgages.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTIONS 4820 AND 4821
Ranking of filed privileges may date back to the moment a contract is filed or the moment work has begun whichever first occurs. This is why a “no-work” affidavit is most important, and must be timely filed to get evidentiary benefit of absolute reliance. The statutory reliance covers the gap between the recordation of the mortgage and the moment of inspection by the affiant, if filed within four days. Never miss this filing period.
R.S. 9:4822 Preservation of claims and privileges
A claimant has sixty days from substantial completion or abandonment of the work to file his lien if no contract is filed. If a notice of contract is properly filed, then only 30 days after a notice of termination is filed, but not longer than six months if none is filed. A general contractor has sixty days to file his lien from the notice of completion or termination, if the contract is filed, but has seven months to file his lien if no notice of termination is filed. A lienor is given seventy days from the notice of termination or its completion (for residential work) to file a lien. The examiner must consider 70 days as the default lien period.
R.S. 9:4823 Extinguishment of claims and privileges
The claimant must file an action to enforce the claim or privilege within one year of its filing.
R.S. 9:4831 Filing; place of filing, contents
Filings are in the mortgage office of the parish where the immovable is located, and must have a “complete property description.” If a contract has been filed with a proper description, reference to the contract will be sufficient for a description.
R.S. 9:4832 Cancellation of notice of contract
A contract can be cancelled on the request of any person after thirty days from when a notice of termination has been filed, if no lien has been filed, but if the contractor does not join in the request, the contract will not be cancelled as to his rights. If 60 days has passed after the filing of the notice of termination, and no liens have been filed, then the contract can be completely cancelled. Under subsection C, a contract can be completely cancelled if requested by the owner and contractor, and within four days a proper “no work” affidavit has been filed. This latter provision solves the issue of a contractor who has filed his contract too soon, i.e., before the mortgage was signed.
R.S. 9:4833 Request to cancel the inscription of claims and privileges; cancellation; notice of pendency of action
The owner or any other interested person may request of the filer of a claim or privilege to cancel such if it is improperly filed, or has been extinguished. The cancellation shall be delivered within ten days of receipt of the request. One who without reasonable cause fails to cancel is liable to the owner for damages and reasonable attorneys’ fees. The effects of the filing of a claim or privilege ceases if a lis pendens is not timely filed within one year. The recorder of mortgages shall cancel the lien upon the request of any interested party.
R.S. 9:4834 Notice of contract; cessation of effect, reinscription
A notice of contract ceases five years after it is filed unless a notice of reinscription is filed by an interested party.
R.S. 9:4835 Filing of bond or other security
No substantial change. Liens can be bonded out as before.
R.S. 9:4841 Enforcements of claims and privileges; concursus
No substantial change. Generally, when multiple liens have been filed, procedurally, a concursus proceeding is instituted under the Code of Civil Procedure.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTIONS 4834, 4835, AND 4841
Prescriptive periods apply to allow for cancellation of inscriptions, as well as bonding out for liens.
R.S. 9:4842 Delivery of communications or documents
Modern methods of communication are now contemplated by the statute.
R.S. 9:4843 Receipt of communications or documents
The timing of a receipt is when the communication or document is actually received.
R.S. 9:4844 Delivery by mail or commercial courier
U.S. Mail which is tracked, and a commercial courier which is actually delivered, are proper methods of delivery. The address is the one contemplated by the parties, or used by them in prior communications. Communications may also be given to the registered agent for service of process, in the case of a juridical entity.
R.S. 9:4845 Delivery by electronic means
Delivery by electronic means is valid for individuals who have consented to that method.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTIONS 4842, 4843, 4844 AND 4845
These statutory revisions now contemplate modern means of notice, in addition to the U.S, Mail.
R.S. 9:4846 Proof of delivery of movables, prima facie evidence.
Proof of delivery of movables to the site is prima facie evidence that the items have become component parts of the immovable, or were used at the site of the immovable.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTIONS 4846
When a supplier dumps a load of goods, for example, lumber, at a site, it is presumed that that delivery went into the construction on the site and gives rise to a right of lien.
R.S. 9:4847 Notice
Prior to entering into a contract for residential home improvements, the contractor must deliver a notice to the owner, verbatim as contained in the statute, basically advising the owner of the rights of subs, suppliers, workers and the protection which a bond can afford.
WHAT YOU SHOULD KNOW ABOUT THE NEW SECTIONS 4847
Contractors should use the statutory form verbatim.
Civil Code Articles 3267, 3269, and 3274
These code articles are modified to reflect the terminology of the revisions described above.
WHAT YOU SHOULD KNOW ABOUT THE NEW LIEN LAW IN TOTO
The changes to the lien law and the ranking of a mortgage which agents will be called upon to insure are extensive, and both substantive and technical. All these changes will take place on January 1st of 2020. Transaction rules are complex. This statute should be read in full, and education courses should be attended. Insurers will expect agents to conform to the new requirements, especially with regard to filing no work affidavits, and determining that the insured mortgages outrank all such liens. From the examiner’s and the insurer’s point of view, doubt as to the existence of lien rights will be resolved in favor of assuming liens could be filed which will be superior to the insured’s rights, AND THAT LIEN EXCEPTIONS MUST REMAIN IN COMMITMENTS AND POLICIES.
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