Tennessee law provides a powerful tool to contractors, subcontractors, and other home improvement workers, assisting them in obtaining payment for their work. If a property owner stiffs your company for labor or services, you can use a legal mechanism called a mechanic’s lien. A mechanic’s lien is a statutory device that essentially creates a cloud on the owner’s title to the land. Often, the mere filing of a lien is enough to convince an owner (or general contractor, if you are a subcontractor) to pay. As a contractor or sub in Tennessee, you should be aware of some basic information on mechanic’s liens.
Before jumping into a discussion of mechanic’s liens in Tennessee, let’s remember that liens (much like litigation) should never be your first step. Most disputes between contractors and owners can instead be resolved through negotiation. You will likely save time and money by dealing directly with the property owner or general contractor.
Imagine that your company performed tiling work in a home and the owner failed to pay the last $1,000 of the bill. First, you should mail copies of the final invoice and/or statements to the homeowner’s home and business addresses. If that receives no response, telephone the owner. Send an email too, in order to create a paper trail. And then try writing a formal demand letter on your company’s letterhead.
If your communications are still being ignored, consider investing in a few hours of a lawyer’s time to write a demand letter, on law firm letterhead. Sometimes property owners or general contractors will take you more seriously if they believe that you are willing to get an attorney involved. While attorneys’ rates differ (rates in metropolitan areas like Nashville will generally be highest), having a lawyer write a simple demand letter will probably cost no more than a few hundred dollars.
More often than not, some combination of the above steps will be enough to push the property owner to pay the balance owed, or at least come to the negotiating table to pay some substantial portion of it. These steps can also help you avoid the time and expense of liens and lawsuits.
Of course, negotiation and demand letters might not always suffice. You will not be surprised to learn that Tennessee law allows you to sue a homeowner who has not paid you, on grounds of simple breach of contract, or based on other related causes of action (such as quantum meruit). The same theories apply if you are a subcontractor or supplier suing a general contractor.
But mechanic’s liens are another important tool in your arsenal. Liens offer a way to pressure an owner to pay by clouding the title to the property. Liens are the result of a specific statute known as T.C.A. §§ 66-11-101 et seq..
Unlike some states, which restrict the types of entities that can file mechanic’s liens, Tennessee allows virtually any person or entity to file a lien so long as it improved a piece of real property.
Under T.C.A. § 66-11-102, “There shall be a lien on any lot or tract of real property upon which an improvement has been made by a prime contractor and any remote contractor.” By “remote contractor,” the statute includes subcontractors, sub-subcontractors, and material suppliers. So long as the person or entity made an “improvement,” they are entitled to file a lien.
What counts as an “improvement” is also pretty liberal. It is defined by T.C.A. § 66-11-101(5) as “any action or any activity in furtherance of constructing, erecting, altering, repairing, demolishing, removing, or furnishing materials or labor for any building, structure, appurtenance to the building or structure, fixture, bridge, driveway, private roadway, sidewalk, walkway, wharf, sewer, utility, watering system, or other similar enhancement, or any part thereof, on, connected with, or beneath the surface; the drilling and finishing of a well… the furnishing of any work and labor relating to the placement of tile for the drainage of any lot or land; the excavation, cleanup, or removal of hazardous and nonhazardous material or waste from real property; the enhancement or embellishment of real property by seeding, sodding, or the planting on real property of any shrubs, trees, plants, vines, small fruits, flowers, nursery stock, or vegetation or decorative materials of any kind; the taking down, cleanup, or removal of any existing shrubs, trees, plants, vines, small fruits, flowers, nursery stock, or vegetation or decorative materials of any kind then existing; excavating, grading or filling to establish a grade; the work of land surveying… and the performance of architectural or engineering work….”
This laundry list includes essentially every activity or material one could imagine as “improving” real property. Significantly, it also includes surveying, architectural services, and engineering services. Many states permit only laborers or material suppliers to lien property, but Tennessee allows design and service professionals to file liens as well.
If you were the “prime” or “general” contractor, and had a contract directly with the property owner, you must provide a “Notice to Owner,” indicating that you have the right to file a lien claim as soon as you begin work on the project. (Often, this notice is explicitly incorporated into the original contract).
After that notice is given, you can go ahead and file a mechanic’s lien (known as a “statement of lien” in the statute) in your local county clerk’s office. Note that there are 95 different counties in the state of Tennessee, and each has its own peculiarities in terms of lien requirements.
You can view a sample version of a Tennessee mechanic’s lien form here. The law requires that your lien include the name of the owner of the property, the name of the person or entity claiming the lien, a description of the property sufficient to identify it (usually the address and/or tax block information), and a statement of the amount due and owing. You will see that your signature needs to be notarized as well.
If you were a subcontractor or material supplier and in contract with an entity other than the owner, you must send written notice to the owner within 90 days of your last date of work (or last date that materials were provided to the job site) before you can file a lien. This three-month period allows the owner to negotiate with the general contractor to secure your payment.
As we already know, general contractors in direct contract with the owner must serve the owner with a Notice to Owner of that contractor’s lien rights at the very start of the project. After the work is complete (or after the contractor leaves the job), the contractor then has one year to file a lien.
Under T.C.A. § 66-11-106, a primary contractor's lien continues for one year after "the date the improvement is complete or is abandoned, and until the final decision of any suit properly brought within that time for its enforcement.”
In other words, once a lien is filed, the general contractor must file the lien within one year, or the lien rights will expire.
For subcontractors and those without a direct contract with the owner, the period is much shorter. Under T.C.A. § 66-11-115, these “remote contractors” have only 90 days in which to send the notice referenced above, and 90 days after that to file the lien.
You may be tempted to file a lien for more than you were actually owed under the contract. Perhaps you want to send a strong message, or perhaps you want to punish the other side, or perhaps you want to recover additional “soft costs” like interest and attorneys’ fees.
Tennessee explicitly prohibits any exaggeration of your lien claim. Under T.C.A. § 66-11-139, lienors could face penalties for such actions: “If, in any action to enforce the lien provided by this chapter, the court finds that any lienor has willfully and grossly exaggerated the amount for which that person claims a lien, as stated in that person's notice of lien or pleading filed, in the discretion of the court, no recovery may be allowed thereon, and the lienor may be liable for any actual expenses incurred by the injured party, including attorneys' fees, as a result of the lienor's exaggeration.”
In other words, filing an exaggerated lien could result in your having to pay the owner’s attorneys’ fees and costs. You would also risk your credibility with the court for any meritorious portions of your claim.
For contractors and subcontractors in Tennessee, liens are an important tool. But they are not necessarily the first or the best means of achieving payment for construction projects.
Remember that merely filing a lien will not force the property owner to pay you (nor will it force the general contractor to pay you if you are a subcontractor). The owner will receive notice of the lien, but unless you file a further lawsuit to foreclose on the lien, then it will merely sit on the property docket. In other words, you will likely need to spend some amount of money on legal fees in order to “force” payment.
However, filing a lien will send an aggressive message, both to the owner and to any general contractor above you. If you take this step, it might put the owner on the defensive, and encourage him or her to get lawyers involved, or to retaliate by publicly claiming that you did shoddy work. Perhaps this is the direction that you need to take, unfortunately, if you see no other way of achieving payment. But be aware that you may quickly escalate the dispute by filing a lien.
Finally, remember that the lien laws in Tennessee are highly complex. They vary depending on where you fall within the construction chain, the type of work you performed, and whether the project is public or private. If you are owed a substantial sum of money, it might be worth investing in a consultation with an experienced Tennessee construction attorney in your area, who can advise you of your rights. Check out Nolo’s Guide to Finding an Excellent Lawyer for assistance in identifying the right person.