A Year After Substantial Completion, and Still Timely Recording Liens
A general contractor’s right to file a lien on a private construction project is governed by Louisiana Revised Statute 9:4822(B). The provision provides that on those projects where the general contractor preserves its privilege by timely recording a notice of contract in the mortgage records, the general contractor “shall file a statement of his privilege within sixty days after the filing of the notice of termination or substantial completion of the work.” However, what happens if the owner never records a certificate of substantial completion? Does the general contractor’s lien period commence upon actual substantial completion of the project, or does the lien period extend indefinitely? While no reported decision by a Louisiana state court has directly address this scenario under La. R.S. 9:4822(B), the precise question was recently decided on March 6, 2017 by the federal appellate court with jurisdiction over Louisiana.
In Golden Nugget Lake Charles, L.L.C. v. W.G. Yates & Sons Constr. Co., 850 F.3d 231 (5th Cir. 2017), the Fifth Circuit United States Court of Appeal framed the issue by stating “[t]he question in this case is one of statutory interpretation: whether the phrase ‘substantial completion of the work’ in § 9:4822(B) refers to an event or a document.” The facts of the case were that the general contractor entered a contract to build a casino, hotel, and spa, for which a notice of contract was recorded in the mortgage records in July 2012. In December 2014, both the owner and general contractor signed a certificate of substantial completion. The certificate, however, was not recorded in the mortgage records. In December 2015, over a year after the project was deemed substantially complete and after litigation had ensued between the parties, the general contractor filed a lien claiming to be due a significant amount on the project.
In response, the owner sought to have the lien claim dismissed in the pending litigation as being untimely. The owner argued that the language of La. R.S. 9:4822(B) does not require that a document (i.e. the certificate of substantial completion) be filed, but rather only that substantial completion of the project actually be achieved. The district court agreed with the owner and held that “there is no filing requirement of a certificate of substantial completion. If a notice of termination is not filed, then the 60 day filing period commences upon the substantial completion of the work.” As a result, the district court held that the lien was untimely as it needed to be filed within sixty days following the December 2014 certificate of substantial completion, regardless of whether that certificate was recorded in the mortgage records.
On appeal, the Fifth Circuit recently reversed the ruling, holding that the Private Works Act “places the burden on an owner to take affirmative action to cut off potential claims when a contract has been recorded.” In reaching this conclusion, the Court relied upon prior Louisiana state court decisions interpreting similar provisions governing subcontractor liens. Those decisions held that when a notice of contract is recorded, the commencement of the subcontractor’s lien period will be extended until a notice of termination or substantial completion is recorded.
While the right to file a lien is generally regarded as being limited by relatively short timeframes, there are certainly exceptions. One needs to look no further than this recent Golden Nugget case for authority that, in certain instances, the filing of a lien by a general contractor over a year after beneficial occupancy or actual substantial completion can potentially be timely.