Published in The Alabama Lawyer, Vol. 61, No. 3, May 2000
This article will address the definition of a mechanic’s lien; the use of a mechanic’s lien by a general contractor, subcontractor or material supplier engaged in the construction industry in Alabama; and the legal process associated with creating and enforcing a mechanic’s lien in Alabama. This article is based on Alabama statutory law regarding mechanics’ liens and various cases interpreting this law.
The Alabama Code specifically addresses mechanics’ liens in §§ 35-11-210 through 35-11-234. A mechanic’s lien is the generic name for a lien on real property1 in favor of a person or entity furnishing labor or materials for the erection of buildings or making improvements on real property. When a mechanic’s lien is filed by a person or entity, the mechanic’s lien creates a legal encumbrance on the subject real property which may negatively affect the property owner or other interest holders in the subject real property such as a financial institution.
The basic theory behind a mechanic’s lien is that one should not be able to enjoy the benefits of another’s work or goods provided without compensating the other for those benefits2 . Mechanics’ liens are applicable to construction projects in which the owner is not a public entity such as a municipality, the State of Alabama or the United States government3. For the most part, construction projects in which the owner is a governmental entity require that the general contractor post payment and performance bonds to provide for payment to persons providing labor or materials to a public project4 .
Before proceeding, it is important to note that the utilization of a mechanic’s lien may be just one legal remedy at the disposal of a contractor or supplier who has not been paid by an owner or general contractor. For example, a contractor or supplier may have other legal remedies at their disposal such as breach of contract. A mechanic’s lien claimant has the right to bring other valid legal claims the claimant may have against the subject defendant(s), in additional to a legal action to enforce a mechanic’s lien.
Alabama Code § 35-11-210 defines the two types of mechanics’ liens potentially available. The type of mechanic’s lien available to a claimant depends primarily on the contractual relationship between the claimant and the owner. A “full price” mechanic’s lien claimant has the ability to file a mechanic’s lien in the full amount of its contract with the owner. An “unpaid balance” mechanic’s lien claimant has a lien right as well, but only for the amount of the unpaid balance due from the owner to the general contractor. Generally speaking, a general contractor has the ability to file a “full price” mechanic’s lien; a subcontractor has the right to file an “unpaid balance” mechanic’s lien; a material supplier having a direct contractual relationship with an owner has the ability to file a “full price” mechanic’s lien; and a material supplier to a prime contractor or a subcontractor has the right to file an “unpaid balance” mechanic’s lien5 .
Nevertheless, a material supplier may also have the ability to file a “full price” mechanic’s lien. Under Alabama Code § 35-11-210, a material supplier may provide notice to the owner that the supplier will be delivering material at a specified price which will be used in the construction project. This “pre-lien notice” must be given before the supplier delivers the material to the general contractor or subcontractor. Once such “pre-lien notice” is given by a material supplier, it may create the ability to file a “full price” mechanic’s lien, unless the owner objects before the material is used by informing the supplier that it will not be responsible for the full price of the subject materials. Often such “pre-lien notice” is not given by material suppliers due to the sensitivity of the customer relationship between the supplier and its direct customer.
In Alabama mechanics’ liens are created by specific statutes. Therefore, anyone seeking to enforce a mechanic’s lien must strictly comply with the terms of the Alabama Mechanics’ Liens Statutes6. Every general contractor, subcontractor and material supplier must adhere to the following statutorily proscribed legal procedure in order to create a legally enforceable mechanic’s lien.
Provide notice to the owner
Contractors having a direct contractual relationship with the owner are classified as “original contractors” by the Alabama Code7 . In a construction context, the general contractor is often the only construction-related entity that has a direct relationship with the owner. An original contractor does not have to provide notice to the owner of the basis of the original contractor’s mechanic’s lien8 . Material suppliers who have not filed a “pre-lien notice” as discussed above and subcontractors must give written notice to the owner that a mechanic’s lien is claimed, and such notice must set forth the amount claimed, for what, and from whom the amount claimed is owed9 . A potential mechanic’s lien claimant should also consider providing this notice to the general contractor and the financial institution lending money for the construction project, if applicable. This notice allows the owner and lending institution to take the appropriate action to ensure that the potential mechanic’s lien claimants are paid.
File a Verified Statement of Lien
After providing notice, if applicable, a mechanic’s lien claimant must file a Verified Statement of Lien in the probate court in the county where the subject real property is located. The Verified Statement of Lien must contain the amount of the claimant’s monetary demand and a description of the subject real property10. Alabama Code § 35-11-213 contains a form that may be used as the Verified Statement of Lien. The Verified Statement of Lien must be filed by an “original contractor” (typically the general contractor) within six months after the last item of work or material has been furnished. Material suppliers who have not given the “pre-lien notice” and subcontractors have four months after the last item of work or material has been furnished11 to file the Verified Statement of Lien. 15.12 See Sherrod v. Crane Co., 182 So. 48 (Ala. 1938).
File a lawsuit to obtain an enforceable mechanic’s lien
A lawsuit must be filed in the county in which the subject real property is located within six months “after the maturity of the entire indebtedness.” 1320. See Ala. Code § 35-11-211 (1975). A debt is mature when it accrues so as to be due and payable.14 However, the parties to a contract may expressly state a time when the entire indebtedness matures15 . The defendants in a lawsuit must include the owner of the subject real property and any person(s) responsible for the debt, and should also include the owner’s lender, if applicable16 . A claimant may also name other persons who claim a legal interest in the land as defendants in order to allow the court to determine the priority of the interest holders in the subject real property17 .
Before commencing the mechanic’s lien process, a claimant should have a clear basis to hold a defendant liable for nonpayment to the claimant. If the mechanic’s lien process is commenced with malice by the claimant, the claimant may be liable for damages incurred by the defendants. Depending on the circumstances of the particular case, the most common defenses to a mechanic’s lien lawsuit are as follows: The claimant did not strictly adhere to the statutory requirements associated with prosecuting mechanics’ liens; the debt is not owed to the claimant; the claimant breached the subject contract or there was no enforceable contract to give rise to the mechanic’s lien; and the claimant executed a “lien waiver.” The fact that a claimant is an unlicensed contractor may also be used as a defense to a mechanic’s lien lawsuit.
A successful mechanic’s lien claimant obtains a legally enforceable interest in the subject real property which can be foreclosed upon such that the subject property may be sold to satisfy the mechanic’s lien claimant’s judgment19 . For example, a mechanic’s lien has priority over all other liens, mortgages or encumbrances created subsequent to the commencement of work on the building or other improvements on the subject real property20 . In addition, the mere commencement of the process associated with creating an enforceable mechanic’s lien creates considerable pressure on the owner and other potentially responsible parties to ensure that the claimant’s legitimate demands are investigated and satisfied.
1 Emanuel v. Underwood Cool & Supply Co., 14 So. 2d 151 (Ala. 1943).
2 See Hairston, Detinue, Execution and Mechanics’ Liens, The Law in Alabama 75 (1980).
3 40 U.S.C. §§ 270(a) – 270(d) (1986); Ala. Code §§ 39-1-1, et seq. (1975).
5 See generally Ala. Code § 35-11-210 (1975); Ala. & Ga. Lumber Co. v. Tisdale, 365 So. 618 (Ala.
6 Buckner v. Alpha Lumber & Supply Co., 628 So. 2d 450 (Ala. 1993).
7 See Ala. Code § 35-11-218 (1975).
10 Ala. Code § 35-11-213 (1975).
11 Ala. Code § 35-11-215 (1975).
13 Ala. Code § 35-11-220 (1975).
14 Howell v. Hallett Mfg. Co., 178 So. 2d 94 (Ala. 1965).
15 See Sherrod v. Crane Co., 182 So. 48 (Ala. 1948).
16 See generally Lily Flagg Bldg. Supply Co., Inc. v. J.M. Medlin & Co., Inc., 232 So. 2d 643 (Ala. 1970);
Ex parte Grubbs, 571 So. 2d 1119 (Ala. 1990); Bailey Mortgage Co., v. Gobbie Fite Lumber Co., 565
So. 2d 138 (Ala. 1990).
17 See Ala. Code § 35-11-223 (1975).
18 See J&M Industries v. Hungley Oil Co., 546 So. 2d 367 (Ala. 1989).
19 See Ala. Code § 35-11-226 (1975).
20 See Ala. Code § 35-11-211 (1975).