For this week’s Guest Post Friday here at Musings, we welcome a new face. Rob Pitkin (@KCconstrlawyer) is an attorney with Levy & Craig in Kansas City, where he handles Construction disputes and other types of sophisticated business litigation. Originally from Iowa, he graduated from Wheaton College and Wake Forest University School of Law. Rob is currently listed in Best Lawyers in America in Construction Law and serves as an Arbitrator on construction cases for the American Arbitration Association. He has been practicing law for 25 years now and focusing on construction law for more than 15 years.
The economic downturn, the banking crisis and the resulting fallout in the construction industry have created more mechanic’s lien priority issues in the past 3 years than I’ve seen in the 20 years prior.
This situation is complicated by the fact that mechanic’s lien laws are based on statutes that can vary significantly from state to state. For example, Kansas City sits on the state line between Missouri and Kansas. Therefore, about half my work involves projects in Missouri and the other half involves projects in Kansas. In many ways, no two adjoining states could be more different.
Missouri was a “slave state” and part of the Confederacy during the Civil War. Kansas, on the other hand, was a “free state” and part of the Union. Heck, the major universities of both states are now even in separate conferences (the University of Kansas and Kansas State University are part of the Big 12 Conference, while the University of Missouri is leaving to join the Southeastern Conference in 2012, despite the fact that KU and Mizzou have played about 120 football games against each other since 1892 – and even dispute the overall record!).
With respect to mechanic’s lien rights, filing requirements, and priorities, Missouri and Kansas are as different as their political and athletic histories. For example, in Missouri, unpaid contractors have 6 months to file a mechanic’s lien, while in Kansas they only have 3 or 4 months, depending on whether they are a general contractor or subcontractor. Similarly, in Missouri, mechanic’s lien claimants have to serve a pre-lien notice on the owner, while in Kansas there is no such requirement. In addition, the itemization requirements are different in both states – Missouri requires a “just and true account” for subcontractor mechanic’s liens, while Kansas simply requires an itemization of the amount due.
But nowhere are Missouri and Kansas more different than on priorities. Missouri has what is called the “first spade” rule, which generally means that all mechanic’s lien claimants have the same priority based on the “first spade” – that is, when construction commenced on the project. § 429.060, RSMo. Kansas, on the other hand, dates priority from the first day of work of the “earliest unsatisfied” mechanic’s lien claimant. K.S.A. 60-1101. Thus, an unpaid finish contractor in Missouri can rely on the first day of work by any contractor on the project, regardless of whether or not the earlier contractors have been paid, while the same unpaid finish contractor in Kansas can only rely on the first day of its own work or of the work by another contractor, but only if that other contractor has also not been paid. In addition, the Missouri courts have developed what is called the “implied waiver” doctrine, whereby mechanic’s liens can have priority over a construction loan (regardless of the “first spade”), while Kansas just mechanically compares the priority of the mechanic’s lien to day the mortgage was recorded.
As the construction industry has tightened over the past couple years, more and more contractors are pursuing work outside their normal geographical scope. As illustrated above, with what can sometimes be very different mechanic’s lien laws among the various states, it’s important to not only know what different rights and remedies there are in the state where a contractor is working, but also what specific notice requirements they might be.
As always, Rob and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.
