While prior blog posts have discussed the basics of mechanics liens as they relate to private construction projects, this post addresses public improvement liens on property owned by the state, a subdivision or agency thereof, or by any city, county, urban-county, or charter county government (hereafter collectively “Government Entity”). As one may imagine, while the principle purpose behind the filing of public improvement liens and private mechanics liens is the same (i.e. to ensure payment for labor, materials and/or supplies furnished on the project), perfection and enforcement of public improvement liens on property owned by a Government Entity differs significantly from the perfection and enforcement of mechanic’s liens against privately owned property.
KRS 376.210 et seq. addresses the filing and perfection of public improvement liens as they relate to property owned by a Government Entity. As you will note below, the time frames for filing and perfecting public improvement liens on property owned by a Government Entity are shorter than for private mechanic’s liens. However, the most significant difference is that, where the property is owned by a Government Entity, the lien claimant has a lien on the funds due the general contractor from the owner of the property improved rather than a lien on the property itself (as with a private mechanic’s lien). The public improvement lien shall be for the full amount owed for labor, materials and/or supplies furnished on the public project and shall be superior to all other liens created thereafter.
The statement of public improvement lien must be filed by the lien claimant within sixty (60) days after the last day of the month in which any labor, materials and/or supplies were furnished or by the date of substantial completion, whichever is later. The lien statement must include the amount due, the date on which labor, materials and/or supplies were last furnished, and the name of the public improvement upon which the public improvement lien is claimed. The lien statement must be filed in the county clerk’s office of the county in which the seat of government of the owner of the property is located.
Once the lien statement has been filed, in order to properly perfect the lien on the funds, the lien claimant must deliver an attested copy of the lien statement to the public authority which contracted for improvement of the subject Government Entity-owned property and must file with that public authority a signed copy of a letter addressed to the contractor owing the lien claimant monies, along with a post office receipt, showing that an attested copy of the lien statement has been sent by the lien claimant to the contractor via certified mail. At that point, the lien claimant shall have a lien on the funds due the contractor which is superior to any subsequently perfected liens.
The public authority is then required to endorse on the attested copy of the lien statement the date if its receipt and shall deduct and withhold the amount claimed from any amount due the contractor or which may become due the contractor. Unless the contractor, within thirty (30) days after delivery of the attested copy of the lien statement, files a written protest with the public authority disputing the correctness of the amount or its liability for payment to the lien claimant, the public authority will pay the lien claimant the amount withheld. If the contractor does file a written protest with the public authority within the 30 day time period, the public authority is required to promptly provide the lien claimant with written notice of such protest and shall continue to hold the withheld amount until directed by the contractor to make payment to the lien claimant or until it is directed to do so by a court of competent jurisdiction. The lien claimant must then file suit for enforcement of its lien and have summons served on the public authority within thirty (30) days after written notice of the protest is mailed to the lien claimant or the lien shall be automatically released and the withheld funds paid to the contractor. All lawsuits for the enforcement of a public improvement lien must be filed in the Circuit Court of the county in which the property on which the labor, materials and/or supplies are provided (except where the property is owned by a public university).
The time frames for filing and perfecting a public improvement lien as opposed to a private mechanic’s lien are much shorter and the requirements for perfecting such a lien are very specific. A public improvement lien is an effective tool to ensure payment for labor and/or materials supplied by the lien claimant on a public project owned by a Government Entity. However, as is clear, such a tool must be used with precision and efficiency.