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Legally Speaking

 

Issue: June, 2008
Author: James R. Belcher

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Nonconsensual Liens Under Title 29 of the Wyoming Statutes for Work Performed and Materials Provided Under Contract to Another Person’s Property

A person who makes improvements to or repairs property adds to its value. Consequently, the Wyoming Legislature granted such persons a lien right against the property to secure payment for contributing to the value of the property. Title 29 of the Wyoming Statutes grants lien rights to persons who perform work or materials to improve real property, mineral interests and personal property. Title 29 also provides lien rights for other work or services performed. This article is intended only as a primer, discussing only liens against real property, minerals and personal property.


Lien Rights and Requirements, Generally
Chapter 1 of Title 29 includes general provisions that apply to all liens. Contractors, subcontractors and materialmen are granted lien rights if the work is performed or the materials are provided pursuant to a contract entered into by the property owner. The general rule is that a lien claimant must provide services or material to the owner or a general contractor. While this language suggests that a supplier to a subcontractor does not hold lien rights, this is not the case, as discussed in more detail below.

The key document to create and enforce a lien is the Lien Statement. For liens against real property or mineral interests, the Lien Statement must be recorded in the real property records of the county in which the improved property is located. The Lien Statement must contain the following information: 1) name and address of lien claimant; 2) lien amount; 3) name and address of the property owner; 4) itemized list of materials delivered or work performed; 5) name of the person against whom the lien claim is made; 6) date labor was last performed or services rendered, or date when the project was substantially completed; 7) legal description of the real property to which the lien is claimed; and 8) copy of the contract, if available. As soon as the Lien Statement has been recorded, notice by certified mail must be sent to the last known owner of the liened property.

All liens enjoy the same priority. Priority is not established by the lien filing date. Rather, the priority date of liens is the date work was first commenced on the property. A perfected lien is expressly granted priority over subsequently perfected other types of liens, security interests or mortgages. Only other types of liens, security interests, or mortgages which have been perfected prior to the commencement of work on the liened property have priority over the Title 29 liens. The Wyoming Supreme Court has not yet ruled when work on a project is first commenced, but the fact that an architect, engineer and surveyor are granted lien rights might suggest that, for purposes of lien claims, work may commence before dirt is first moved. A ruling that follows that logic would preclude a construction lender from ever obtaining legal assurance that its mortgage lien enjoyed priority over any Title 29 lien because architectural and engineering services are almost always performed before a loan application is submitted to a construction lender. In the event proceeds from sale of the liened property are insufficient to pay all liens in full, then proceeds are to be prorated among all lien claimants (e.g. [the amount of a lien claim divided by all lien claims multiplied by the net sale proceeds available for distribution to lien claimants).

An owner may obtain a lien release by depositing a bond, letter of credit or other security in an amount equal to 1½ times the lien claim with the district court in the county in which the lien is filed. The bond or other security substitutes for the lien against the property.

A property owner who believes that a lien claim is forged, groundless or based on a false claim may file a petition for damages in the district court in the county in which the property is located. The owner has the right to a prompt hearing (no sooner than six nor later than 15 days following the date of serving the petition) at which the lien claimant must show cause why relief requested by the owner should not be granted. If the court finds that the lien claim is forged, groundless or false, the court must order the lien claimant to pay the amount of actual damages suffered by the owner, but in no event less than $1,000, together with reasonable attorney’s fees. If the court finds that the lien is valid, the lien claimant may recover attorney’s fees from the owner.


Liens for Improvements to Surface Interests
Chapter 2 of Title 29 governs, and provides more specifics for, liens for work performed on surface interests in real property. The lien rights under Chapter 2 are granted to every person performing work or furnishing materials or plans on a project. It does not contain the same apparent limiting language contained in Chapter 1 that subcontractors or materialmen must perform work or furnish materials to the general contractor or owner. Rather, Chapter 2 lien rights have been construed to allow a materialman for a subcontractor to successfully assert a lien claim. The lien attaches only to the interest of the owner in the property. If the owner holds only a leasehold interest, the lien attaches only to the leasehold interest, unless the landlord agreed to pay for the construction costs, or improvements are specifically authorized by the landlord.

Enforcement of a lien under Chapter 2 is subject to several potential notice requirements. If the property is 1) an existing single-family dwelling, 2) a residence constructed by the owner or under contract prior to its occupancy as the owner’s primary residence, or 3) a single-family, owner-occupied dwelling unit, then the general contractor or a subcontractor must provide the owner with written notice that the failure of the general contractor or subcontractor to pay suppliers may result in the filing of a lien, and to avoid a lien the owner may ask for lien waivers from all persons supplying materials or services. Notice given by only one general contractor or subcontractor relieves the general contractor or other subcontractors from the obligation to provide this notice.

For construction projects of $50,000 or more, a subcontractor or materialman is required to give notice to the general contractor of such person’s right to claim a lien. This notice requirement only applies if the owner has included in the project specifications the notice requirements and the general contractor posts on the construction site a prominent sign providing the details regarding notice. A subcontractor or materialman who is required to provide notice to the general contractor must do so no later than 60 days after first providing services or materials. The notice must be sent to the general contractor by certified mail (suggested with return receipt requested) or personally delivered and receipted by the general contractor. The notice must 1) state that it is a notice of a right to claim a lien, 2) be signed by the potential lien claimant, 3) provide the name, address and phone number of the potential lien claimant, and the name of a contact person for the potential lien claimant, 4) contain the name and address of the potential lien claimant’s vendor[s], and 5) state the type or description of the materials and services to be provided to the project. Failure to provide this notice waives the right to a lien.

All lien claimants, no matter what type of project, are required to give notice to the property owner of intent to file a lien before filing a Lien Statement. Failure to provide this notice at least 10 days before filing a Lien Statement invalidates the lien claim. The notice must be given to the owner of record as of the date of the notice even if that owner was not the owner at the time the services were performed or materials delivered. Failure to do so invalidates the lien. Assuming the notice of intent to file a lien has been properly sent, a contractor must file a Lien Statement no later than 120 days, and all other lien claimants must file a Lien Statement no later than 90 days, after 1) the last day work was performed or materials furnished under contract, 2) the date work was substantially completed or materials furnished, or 3) with respect to an employee or subcontractor, the last day work was performed at the direction of the employer or contractor. Failure to timely file a Lien Statement makes the lien void.

A general contractor has a statutory duty to indemnify the property owner against lien claims of subcontractors and materialmen. The general contractor must defend the owner against lien claims of subcontractors and materialmen, and the owner is entitled to withhold payment due to the contractor for the amount of any filed liens. If a lien claim is adjudged to be valid, the owner may deduct the judgment for the lien claim from the amount owing to the general contractor or recover such amount from the general contractor if the amount owing is less than the lien claims. The limitations period for bringing a lien foreclosure action is 180 days after a Lien Statement is filed. Failure to commence a foreclosure action within that period invalidates the lien.


Liens for Work on Mineral Interests
Chapter 3 of Title 29 governs liens for work performed on or materials provided to mineral interests. Lien rights are granted to “[e]very person who works upon or furnishes material … under contract with the owner” of an interest in the mineral estate. “Materials” and “Drilling” are broadly defined to include most services between the time onsite work commences and wells or mining is completed, and “work” also includes repairs to wells and mines. Notably, drilling rigs are expressly excepted from the definition of materials provided. The lien granted under Chapter 3 secures payment not only for work performed or materials provided, but also for transportation and mileage charges, advertising and sales costs in enforcing the lien, and (notably) attorney’s fees and other costs of collection. A lien to secure attorney’s fees is not provided for real estate liens under Chapter 2 (but may be allowed to the general contractor if provided in the contract between the general contractor and owner).

Unlike real estate liens under Chapter 2, no notice of intent to file a lien is required before filing a Lien Statement for work performed on or materials provided to mineral interests under Chapter 3. However, the lien amount must be at least $750.

Since mineral interests can be owned by a large number of persons, the mineral interest subjected to a lien is limited to the interest for which work was performed. The lien does not extend to fee or royalty interests unless expressly allowed by contract with the owner of the underlying fee or royalty interest. For pooled or unitized interests, the lien extends to all interests included in pooling or unitization agreements or by operation of law.

The Lien Statement must be filed within 180 days after 1) the last day materials were delivered or work performed under contract, 2) work was substantially completed, or 3) with respect to an employee or subcontractor, the last day work was performed at the direction of his employer or contractor. As soon as a Lien Statement has been recorded in the county where the liened property is located, the county clerk must provide notice, by certified mail, to the mineral interest owner. (emphasis added) A lien claimant may also provide notice of the lien claim by certified mail, return receipt requested, to the purchaser of oil, gas or other minerals. The notice must provide the 1) name and address of the lien claimant, 2) lien amount, and 3) description of the interest to which the lien attaches. At the time such notice is received, proceeds payable to the owner of the liened interest are immediately subject to the lien, and the purchaser is required to withhold payments for oil or gas runs or minerals purchased up to the amount of the lien claim until the purchaser receives written notice that the lien claim has been settled or otherwise ordered by a court of competent jurisdiction.

In addition to the notice from the county clerk required to be given when a Lien Statement is recorded, a lien claimant (who is not the owner’s contractor) is required to send the owner by certified mail return receipt requested a notice stating the unpaid claim amount. Upon receipt, the owner is authorized to retain from payments owing the contractor the amount claimed to be owing, and the owner must provide the contractor with a copy of the notice. Within 10 days following contractor’s receipt from owner of the notice, the contractor is required to provide the owner written notice of the contractor’s intent to dispute the claim, or consent that the claim should be settled in the amount claimed to be owing. If the contractor fails to provide the owner with such written notice, the contractor is presumed to agree to the validity of the claim and the owner is authorized to make payment to satisfy the claim.

Like the limitations period for surface improvement lien proceedings under Chapter 2, a mineral lien foreclosure action must be commenced within 180 days after the Lien Statement is recorded or the lien is void.


Liens for Work on Personal Property
Chapter 7 of Title 29 governs liens against personal property. It grants a possessory lien right to persons who perform work on tangible personal property and those who care for or keep animals. A lien claimant can retain lien rights by filing a Lien Statement in the county clerk’s office where the personal property is located, provided the Lien Statement is filed before voluntarily releasing possession of the property. In addition to the information required under Wyo. Stat. § 29-1-301, a lien claimant must also include in the Lien Statement a statement whether the claimant was in possession of the liened property or the property owner consented to the Lien Statement filing. Further, a lien against titled vehicles requires that the lien be affixed to the certificate of title.

The lien terminates if possession is voluntarily surrendered or, if not, 180 days after the date 1) work was performed unless a Lien Statement has been properly filed, or 2) the Lien Statement was filed, unless action taken to enforce the lien is taken. The lien can be enforced by public or private sale. Judicial action is not required. The lien claimant must provide prior notice of sale to the owner, giving the amount claimed to be owing, nature of the proposed sale, and time and place of any public sale.

The lien granted under Chapter 7 has priority over all other liens, encumbrances and security interests, except that it is subject to other possessory liens granted under Chapter 7 if the liened property is not in possession of the lien claimant. However, the lien rights granted to a lessor of mobile home space is subject to prior perfected security interests in mobile homes. A mobile home space lien claimant is authorized to remove the mobile home no sooner than 30 days after notice of the lien has been given to the owner. Mobile home space lien claimants may enforce their lien rights in the same manner as secured parties under the Uniform Commercial Code.


Conclusion
The lien rights afforded to persons who improve the value of another person’s real or personal property gives the lien claimants security that they will be paid in whole or part from the property if the person with whom they contract fails to pay. The lien claimant must be attentive to all of the notice and recording requirements and diligent in asserting lien rights. Proper lien creation and enforcement should be undertaken with surgical precision. Failure to strictly comply with the statutes applicable to the particular lien type may invalidate the lien and could subject a lien claimant to damages and attorney’s fees under the lien statutes.

James R. Belcher earned a B.S. in finance from the University of Colorado in 1972. After a 13-year career as a commercial banker, he earned his law degree from the University of Wyoming, graduating in 1988. He joined a large regional law firm and practiced as a partner in the Cheyenne office. He and Don Schultz recently formed Schultz & Belcher LLP and he has continued his practice in Cheyenne in his new firm.

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