A person who furnishes labor or materials for the construction or repair of an improvement on real property may obtain a mechanic's lien[1] on the real property to secure payment for the labor or materials.[2] Oklahoma lien laws also generally require a “pre-lien notice” to be sent (but not filed) before a lien is filed.[3] The time for filing a lien (or, more correctly, a “lien statement”) depends upon whether the lien claimant is a contractor or a subcontractor. The difference between a contractor and a subcontractor is that a contractor deals directly with the owner of the property, while a subcontractor deals with the contractor or another subcontractor.[4]

WHAT LABOR IS LIENABLE?

Persons present and working on the subject property and/or providing materials for the improvement of the property are entitled to a lien.[5] Thus, masons, concrete workers, framers, HVAC contractors and all the other workers who are typically considered part of the construction crew are entitled to liens.

The services of an architect, a surveyor and an engineer are lienable provided that the services are used in the work done on the land.[6] In Stern v. Great Plains Federal Savings & Loan Association, the Oklahoma Court of Civil Appeals held:

The nature of the work done by an architect, e.g., plans and specifications which are drawn prior to the first work done on the land, is work which is not seen on the land itself. However, it leads to the work which is done on the land. These services are necessary before the actual physical construction upon the land can take place, and without which such construction would not occur. We hold that the services of an architect in the preparation of plans and specifications which are used in the work done on the land are improvements of land and are thus lienable claims under 42 O.S.1981 § 141.[7]

However, if such services do not result in actual construction (such as when an owner decides not to build the project), the services are not lienable.[8] Such “labor ... is lienable only when it results in some actual ‘erection, alteration or repair of any building, improvement or structure thereon.’”[9] The court held: “The lien statute contemplates that the land is improved through some ‘erection, alteration or repair’ of a building, improvement or structure on the land. An architect's work need not be the actual work done on the land; however, to be lienable, it must be services which results in work being done on the land.”[10] The court further held: “Phases II and IV of a construction project were never funded or constructed. Thus, Appellant's architectural services for Phases II and IV, as shown on the statement attached to his lien, were not used to improve this property and were not lienable claims under 42 O.S.1981 § 141.”[11]

When 1) a temporary staffing company enters into a contract with its client to provide temporary laborers for use on its various commercial construction projects, 2) the contract does not refer to a particular project and 3) the temporary staffing company provides the client with laborers on an open account, the staffing company is not a “subcontractor” in a commercial construction project. Thus, is not a proper lien claimant under statutes on materialmen's liens.[12]

PRE-LIEN NOTICES

Effective Nov. 1, 2011, Okla. Stat. 42 §142.6(B)(1) has been amended to provide (with new language italicized):

Prior to the filing of a lien statement pursuant to Section 143.1 of this title, but no later than seventy-five (75) days after the last date of supply of material, services, labor, or equipment in which the claimant is entitled or may be entitled to lien rights, the claimant shall send to the last-known address of the original contractor and owner of the property a pre-lien notice pursuant to the provisions of this section. Provided further, no lien affecting property then occupied as a dwelling by an owner shall be valid unless the pre-lien notice provided by this section was sent within seventy-five (75) days of the last furnishing of materials, services, labor or equipment by the claimant.

Liens excluded from these requirements are discussed below. Section 143.1 (referenced in the above-quoted language) pertains to “the filing of the lien statement provided for in Sections 142 and 143.” Sections 142 and 143 govern liens by contractors and subcontractors, respectively. The required contents of a pre-lien notice are set forth in Section 142.6(B)(2).[13]

One problematic aspect of this section is that, despite the foregoing reference to Sections 142 and 143 (covering liens by contractors and subcontractors, respectively), the term “claimant” is defined in Section 142.6(A)(1) as “a person, other than an original contractor, that is entitled or may be entitled to a lien pursuant to Section 141 of Title 42 of the Oklahoma Statutes.” As noted, Section 141 pertains only to contractors, so this definition seems to limit (contrary to the previously mentioned portions of the section) to liens filed by contractors (i.e., this definition seems to exclude liens by subcontractors from the scope of §142.6). Also, the term “original contractor” is not defined in the statutes, so it is not clear what is excepted from the definition of “claimant.” To be safe, a pre-lien notice should be filed regardless of whether a lien is filed by a contractor or a subcontractor.

The quoted amendments to §142.6(B)(1) now clarify that the 75 days begin with the date of the last supply of material, services, labor or equipment. Before this amendment, it was not clear when the 75 days began.

Two other changes are effected by the amendments. The first increases the number of instances for which pre-lien notices are required by providing that the pre-lien notice requirements now apply to all owner-occupied dwellings, regardless of the amount of the claim for material, services, labor or equipment. However, the second decreases the number of instances for which pre-lien notices are required by providing that pre-lien notices are not required for claims of less than $10,000 against all other properties (i.e., for all claims against properties other than owner-occupied dwellings).

Liens Excluded From Pre-Lien Notice Requirements

Section 142.6(B)(3) provides:

The pre-lien notice requirements shall not apply to a claimant:

1. 1. whose claim relates to the supply of material, services, labor, or equipment furnished in connection with a residential project. For the purposes of this subparagraph, the term "residential" shall mean a single family or multifamily project of four or fewer dwelling units, none of which are occupied by an owner, or
   2. whose aggregate claim is less than Ten Thousand Dollars ($10,000.00).

A claimant who fails to send a pre-lien notice is not prohibited from asserting any lien at all; such a claimant can still file and (assuming the lien is timely filed) enforce a lien for $9,999 and seek foreclosure of that lien along with a judgment for the full amount claimed.[14]

LIEN STATEMENTS

Contractors

 A contractor may claim a mechanic's lien on real property by filing a lien statement with the county clerk within “four months after the date upon which material or equipment used on said land was last furnished or labor last performed under contract.”[15] The lien statement must set forth: 1) the amount of the contractor's claim, 2) an itemized statement of the claim, 3) the names of the property owner and the contractor claiming the mechanic's lien and 4) a legal description of the property. The contractor lien claimant must verify the statement by affidavit and file it with the county clerk for the county where the property is located.[16]

Subcontractors

A subcontractor may claim a mechanic's lien on real property by filing a lien statement within 90 days after the subcontractor last furnishes labor or materials under the subcontract.[17] The lien statement must set forth: 1) the amount of the subcontractor's claim, 2) an itemized statement of the claim, 3) the names of the property owner, contractor and subcontractor who are claiming the mechanic's lien and 4) a legal description of the property.[18] The subcontractor lien claimant must verify the statement by affidavit and file it with the county clerk for the county where the property is located.[19]

Sub-Subcontractors

Although Oklahoma’s lien statutes don’t specifically define “sub-subcontractor,” Oklahoma’s Fair Pay for Construction Act defines a sub-subcontractor as “any entity that has a direct contract with another subcontractor to perform a portion of the work under a construction contract.”[20] A sub-subcontractor is generally treated as a subcontractor.

Amendments

A party may file (without a court’s permission) multiple mechanic’s lien statements in an effort to perfect a proper lien as long as the time for filing the lien has not expired. Such timely amendments may, among other things, increase the amount claimed.[21] After a foreclosure action is filed, a lien statement is treated just as any other pleading that may be amended “in furtherance of justice as pleadings may be in any matter.”[22]

TIME REQUIRED BETWEEN A PRE-LIEN NOTICE AND A LIEN STATEMENT

When a pre-lien notice is required, it must be sent “prior to the filing of a lien statement.”[23] Technically, the lien statement can be filed the same day as the pre-lien notice was sent as long as the pre-lien notice is sent first. However, to avoid having to prove that a pre-lien notice that is postmarked one day was sent before a lien statement was filed that same day, the lien statement should be filed at least one day after the pre-lien notice is sent (assuming that still leaves enough time to timely file the lien).

PROBLEMS IN DEALINGS WITH TENANTS AND VENDEES

Title 42 Okla. Stat. §141 provides, among other things, “If the title to the land is not in the person with whom such contract is made, the lien shall be allowed on the buildings and improvements on such land separately from the real estate." This quoted language has been a part of Oklahoma's lien law since 1923, but it has caused substantial confusion, especially when a contractor deals with a tenant or a person purchasing the property under a contract not yet fully executed (rather than the owner of a property).

However, cases provide some guidance. In Deka Development Co. v. Fox, the court quoted from an earlier opinion:

The right of a materialman to a lien depends upon contract. Such contract may be either oral or written. If a lien is asserted against real estate, the contract must be made by the owner or his duly authorized agent. Where a materialman seeks to assert a lien for material furnished to a lessee who holds under a written contract with the lessor, and it fails to appear that the lessee was constituted by the landowner as his agent to purchase the material, the lien of the materialman can extend no further than the improvements constructed out of the material furnished.[24]

However, the court in Deka stated that a lien would attach to all of the real property, where – under a lease – “the owner is obligated to reimburse the tenant for the cost of the improvements or where such improvements are made for the primary benefit of the owner.”[25] But, as is clear from the following quote, mere reversion of the improvements to the owner at the termination of the lease does not mean the improvements “are made for the primary benefit of the owner.”

Regarding when a lien attaches to improvements, the court said:

Where the owner leases lands under a written contract which provides that the tenant shall at his own expense make such improvements thereon as are necessary to make the premises adaptable for the purposes for which they are leased, and the lease further provides that the improvements shall revert to the owner at the termination thereof, a materialman furnishing material for making the improvements under contract with lessee is not entitled to a lien against the land, but he may be entitled to a lien against the improvements in certain circumstances.[26]

Furthermore, for a lien to attach to the improvements, the improvements resulting from the labor and/or materials provided by the claimant must be such that they are “removable without damage to the original structure”:

Had the claimants merely repaired or made minor alterations to existing structures on the premises, they would not have acquired liens on the improvements separate from the real estate. [citations omitted]

The basic reason for concluding that mere repairs and alterations to an existing structure will not support a lien against such structure is that such improvements are not removable without damage to the original structure and the Legislature obviously did not intend that the lien in such case should extend to the entire existing structure without a contract with the owner of same. This would be in direct conflict with the spirit of the statute. We must, therefore, determine whether the labor performed and material furnished in the instant case resulted in the erection of a new building, or mere repairs to or alterations of an existing building.[27]

Recommendations

Various arguments have been advanced to hold an owner liable for improvements made under contract with a vendee or tenant. Arguments have been made that the owner ratified the contract between the tenant/vendee and the contractor, the owner should be estopped from denying the lien or its attachment to the property and the property should be subject to the lien (and the owner should be liable for the improvements) to prevent unjust enrichment. However, these arguments have been largely rejected. Therefore, contractors and subcontractors should, before providing any labor or materials, verify from a check of the county records that the contractor is dealing with the record owner of the property.

NOTICE OF FILING LIEN STATEMENT

Both a contractor lien claimant and a subcontractor lien claimant must provide the county clerk with the last known address of the property owner.[28] The county clerk is responsible for mailing a notice of filing the lien statement by certified mail return receipt requested to the property owner within one business day after filing the lien statement.

PRIORITY OF LIENS

Mechanic's liens are an exception to the general rule in 42 Okla. Stat. §15 that liens are ranked according to the time of their creation. The priority of a mechanic's lien regarding all other liens and encumbrances on the property dates from the commencement of construction.[29]

HOMEOWNER NOTICE

Effective Nov. 1, 2011, lien claimants are no longer required, as a prerequisite to enforcement of a lien, to furnish a statement warning the homeowner of the possible consequences of the mechanic's lien law before the construction begins.[30]

WHAT PROPERTY IS LIENABLE?

It may seem logical that a homestead is exempt from materialmen’s liens, but such is often not the case. Generally, “When the provisions of the materialman's lien statute are complied with, the lien attaches to the homestead.”[31] However, there is one statutory exception: “The provisions of this act as relating to leased or rented equipment shall not apply to real property qualified for homestead exemption or real property used for agricultural purposes or real property used for the production of or growing of agricultural products.”[32]

However, there is a class of property that is exempt from materialmen’s liens: property owned by a governmental entity. There can be no mechanic's lien on public property unless the statute creating such lien expressly so provides, since such a lien would be contrary to public policy and would be incapable of enforcement – public property not being subject to forced sale.[33]

Typically, a contractor hired by a governmental entity has little concern about not being paid by the governmental entity (assuming the contractor properly performs its work). However, subcontractors of a contractor hired by a governmental entity may be left unpaid if the contractor accepts payment from the governmental entity but fails to pay subcontractors. Fortunately, the subcontractors are usually protected by the performance bond that contractors are generally required to post when undertaking work on governmental property.[34] But like materialmen’s liens, there is a deadline that must be met to recover on the bond.[35]

WAIVER OF LIEN RIGHTS

Oklahoma has a statute that prohibits a contract provision that generally 1) makes the contract subject to the laws of another state or requires any litigation, arbitration or other dispute resolution proceeding arising from the contract to be conducted in another state or 2) disallows or alters the rights of any contractor or subcontractor to receive and enforce rights.[36] However, this statute was held inapplicable to mechanic’s liens by H2K Techs v. WSP USA.[37] Nevertheless, H2K does provide some protection for a sub-subcontractor lien claimant by holding that when a sub-subcontractor has not waived its right to file a lien, it is not prohibited from filing its lien solely based upon the fact that an original subcontractor had waived its right in its subcontract with the original contractor.[38]

ACTION TO FORECLOSE A MECHANIC'S LIEN

An action to foreclose a mechanic's lien must be filed within one year of filing the lien statement.[39] A reasonable attorney fee is recoverable by the prevailing party.[40]

DISCHARGE OF A MECHANIC'S LIEN

A mechanic’s lien is discharged by operation of law “one year after the lapse of one (1) year from the filing of the lien if no action to foreclose or adjudicate the lien has been instituted.”[41] Thus, after one year following the filing of the lien, title examiners will simply disregard the filing of the lien when no foreclosure action has been filed, even without a filed release of the lien and even without a judicial determination that the lien is no longer valid. Because of the one-year filing deadline for a lien and the lack of a need for a lien release after one year, waiting and hoping that a lien claimant will fail to file a lien foreclosure action is a common tactic of landowners, especially when the landowner feels the lien claimant has filed the lien without justification and the lien claimant is merely trying to strong-arm the landowner into paying money that is not owed.

Title Standard 24.10 provides this caveat: “If suit to foreclose or adjudicate the lien is timely instituted and the case is dismissed other than on the merits, or if a judgment in favor of plaintiff is reversed, the plaintiff shall have one (1) year from the date of dismissal or reversal to institute a new action.”[42] A property owner may discharge a mechanic's lien by posting a bond or cash for 125% of the lien claim.[43] If a bond is used, it must be a corporate surety bond. In addition to the bond, the property owner must provide the county clerk with a $5 filing fee and a notice containing the number of the lien claim, the name of the lien claimant, the name of the property owner, the name of the debtor (if other than the property owner), a property description and the amount of cash deposited or, if a bond is filed, the names of the principal and surety and the amount of the bond.

The county clerk is required to mail the notice to the lien claimant within three days. The lien claimant has 10 days after the mailing to file written objections limited only to its formal aspects, the amount of the bond and the sufficiency or authority of the surety. If any objections are filed, the county clerk conducts a hearing to rule on them. If no objections are filed or the objections are overruled, the mechanic's lien is released of record, and the cash deposit or bond will stand in lieu of the extinguished mechanic's lien.

PROBLEMS WITH BONDS

The obvious purpose of the requirement that the bond be for 125% of the lien amount is to provide an extra 25% to cover the lien claimant’s attorney fees and costs. This extra 25% may be sufficient for liens of significant amounts, but for liens of lesser amounts, the extra 25% is usually insufficient. For example, a lien for $1,000,000 will require a bond of $1,250,000, which provides an extra $250,000 to cover the claimant’s attorney fees and costs (which will be more than sufficient in all but the most complex cases). However, a lien for $10,000 will require a bond of $12,500, which provides only $2,500 for attorney fees and costs (which will be insufficient in almost every case).[44]

Because of this, including a claim for attorney fees and interest in the lien amount is helpful to secure a higher bond. For example, in H2K, “The [lien] statement claims a lien in the amount of $120,780.00 plus interest after March 6, 2019, at a monthly rate of 1.5%, plus attorney fees and filing costs.”[45] The defendant originally posted a bond of only $150,975 (125% of $120,780), but “after [the lien claimant] objected to the bond amount, an additional $14,535.00 was placed into a trust account” to serve as an additional bond.[46]

OKLAHOMA’S TRUST FUND STATUTES

Oklahoma has adopted two statutes (42 Okla. Stat. §§152-153, commonly known as Oklahoma’s Trust Fund Statutes) that declare that certain payments are held in trust for the payment of all “lienable claims due and owing or to become due and owing.”[47] These statutes are in addition to lien rights, and they create personal liability for officers/managers of an entity that fails to ensure that trust funds are used to pay lienable claims. For more information on this topic, see Kevin F. Frates’s article in the Oklahoma Bar Journal article referenced.[48]

CONCLUSION

Leveraging rights in Oklahoma's construction landscape requires a comprehensive understanding of the intricacies involved in securing payment for labor and materials in construction projects. Key aspects, such as the definition of lienable labor, pre-lien notices, lien statement filing requirements and considerations regarding tenants and vendees add layers of complexity to the process. Statutory amendments underscore the importance of staying updated with legislative changes. Conducting due diligence to ensure dealings with a property’s record owner is critical to ensuring a means of collecting for labor and materials provided. Procedures for filing and enforcing liens along with nuances – such as priority of liens, homeowner notices and exemptions for certain types of property – further underscore the multifaceted nature of Oklahoma’s lien laws. Additionally, mechanisms for the discharge of liens, including bond requirements and the potential for disputes, necessitate careful navigation.

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ABOUT THE AUTHOR

Brett Agee has practiced law in his hometown of Pauls Valley since graduating from the OU College of Law in 1988. He practices general civil litigation, including construction law litigation and has tried cases in Colorado, Texas and Oklahoma. Mr. Agee is also a member and former director of the Oklahoma Association for Justice, which presented him with the Member of the Year Award in 2005.

 

 

 

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ENDNOTES

[1] In this article, references to mechanic’s liens and references to materialmen’s liens are references to both mechanic’s and materialmen’s liens, which are treated in the same manner under Oklahoma law.

[2] 42 Okla. Stat. §§141, 143.

[3] 42 Okla. Stat. §§142.6.

[4] See Welling v. American Roofing & Sheet Metal Co., 1980 OK 208 ¶4, 617 P.2d 206, 208.

[5] 42 Okla. Stat. §143.

[6] Stern v. Great Plains Fed. Sav. & Loan Ass'n, 1989 OK CIV APP 46, ¶5, 778 P.2d 933, 935.

[7] Id., citing Midland Mortgage Company v. Sanders England Investments, 1984 OK 10, 682 P.2d 748; Green v. Reese, 1953 OK 198, 261 P.2d 596, citing Peaceable Creek Coal Co. v. Jackson, 1910 OK 85, 26 Okla. 1, 108 P. 409.

[8] 1989 OK CIV APP 46, ¶7.

[9] Id.

[10] Id.

[11] Id.

[12] Advanced Res. Sols., LLC v. Stava Bldg. Corp., 2019 OK CIV APP 28, 441 P.3d 551.

[13]As is noted above, the pre-lien notice requirements now apply to all owner-occupied dwellings of any kind, regardless of the amount of the claim.

[14] Id.

[15] 42 Okla. Stat. §142.

[16] Id.

[17] 42 Okla. Stat. §143.

[18] Id.

[19] 42 Okla. Stat. §142.

[20] 61 Okla. Stat. §222.

[21] Biantrav Contractor, LLC v. Condren, 2020 OK 73, ¶7 and 9, 489 P.3d 522, 523.

[22] Id. at ¶8, citing 42 Okla. Stat. §172.

[23] 42 Okla. Stat. §142.6B.

[24] Deka Development Co. v. Fox, 1934 OK 698 at ¶0, 39 P.2d 143.

[25] Id., at ¶0 (Syllabus 4) (emphasis added).

[26] Id., at ¶0 (Syllabus 2) (emphasis added).

[27] Statser v. Chickasaw Lumber Co., 1958 OK 177 at ¶¶24-26, 327 P.2d 686, 691 (emphasis added).

[28] 42 Okla. Stat. §143.1.

[29] 42 Okla. Stat. §141.

[30] Prior to Nov. 1, 2011, 42 Okla. Stat. §§142.1, 142.3 and 142.5 required a party claiming a mechanic's lien on owner-occupied property to have furnished a statement warning the homeowner of the possible consequences of the mechanic's lien law before the construction began in order for the lien claimant to enforce the lien. Although those sections are repealed effective Nov. 1, 2011, homeowners are provided different protections beginning Nov. 1, 2011, as is discussed above in “Pre-Lien Notices.”

[31] Kleindorfer v. Dascomb-Daniels Lumber Co., 1924 OK 443, 102 Okla. 60, 226 P. 354, 354–55. See also 31 Okla. Stat. §5 (“The exemption of the homestead provided for in this chapter shall not apply where the debt is due: ... 3. For work and material used in constructing improvements thereon”).

[32] 42 Okla. Stat. §143.3.

[33] Hutchinson v. Krueger, 1912 OK 368, 34 Okla. 23, 124 P. 591, 592.

[34] See 61 Okla. Stat. §§1 et seq.

[35] 61 Okla. Stat. §2 (subcontractors must give “written notice to the contractor and surety on the payment bond within ninety (90) days from the date on which such person did or performed the last of the labor or furnished or supplied the last of the material or parts for which the claim is made”).

[36] 15 Okla. Stat. §821.

[37] H2K Techs., Inc. v. WSP USA, Inc., 2021 OK 59, ¶17, 503 P.3d 1177, 1185.

[38] Id., at ¶15.

[39] 42 Okla. Stat. §172.

[40] 42 Okla. Stat. §176.

[41] Oklahoma Title Examination Standards Section 24.10, 16 Okla. Stat. App.

[42] Citing 12 Okla. Stat. §100 and Newman v. Kirk, 1933 OK 405, 164 Okla. 147, 23 P.2d 163 (1933).

[43] 42 Okla. Stat. §147.1.

[44] Of course, when a bond is posted, the bond does not legally limit the defendant’s liability to the amount of the bond, but if the defendant is not financially sound, the bond may, as a practical matter, provide the only means of recovery.

[45] H2K Techs., Inc. v. WSP USA, Inc., 2021 OK 59, ¶2, 503 P.3d 1177, 1179.

[46] Id.

[47] 42 Okla. Stat. §152(1).

[48] See Kent F. Frates, “Mechanics' and Materialmen's Lien Claims: Recovery under Oklahoma's Trustee Statutes,” 47 OBJ Q-125 (1976), which can be accessed by using the search instructions at www.okbar.org/barjournal/archive.