Posted On: July 26, 2009


In Alabama, contractors have two different types of liens that may apply to their project. This blog entry concerns the "unpaid balance lien." This lien generally applies to contractors who DO NOT have a direct contract with the property owner.

Alabama Code § 35-11-210 provides for an unpaid balance lien as follows:
“Every mechanic, person, firm, or corporation who shall do or perform any work, or labor upon, or furnish any material, fixture, engine, boiler, waste disposal services and equipment, or machinery for any building or improvement on land, or for repairing, altering, or beautifying the same, under or by virtue of any contract with the owner or proprietor thereof, or his or her agent, architect, trustee, contractor, or subcontractor, upon complying with the provisions of this division, shall have a lien therefor on such building or improvements and on the land on which the same is situated, to the extent in ownership of all the right, title, and interest therein of the owner or proprietor, and to the extent in area of the entire lot or parcel of land in a city or town; or, if not in a city or town, of one acre in addition to the land upon which the building or improvement is situated; or, if employees of the contractor or persons furnishing material to him or her, the lien shall extend only to the amount of any unpaid balance due the contractor by the owner or proprietor, and the employees and materialmen shall also have a lien on the unpaid balance. But if the person, firm, or corporation, before furnishing any material, shall notify the owner or his or her agent in writing that certain specified material will be furnished by him or her to the contractor or subcontractor for use in the building or improvements on the land of the owner or proprietor at certain specified prices, unless the owner or proprietor or his or her agent objects thereto, the furnisher of the material shall have a lien for the full price thereof as specified in the notice to the owner or proprietor without regard to whether or not the amount of the claim for the material so furnished exceeds the unpaid balance due the contractor, unless on the notice herein provided for being given, the owner or proprietor or his or her agent shall notify the furnisher in writing before the material is used, that he or she will not be responsible for the price thereof.”

Simply put, if you don’t have a direct contract with the property owner or you did not provide prior notice (for materials only not labor) you have an unpaid balance lien.

Unpaid balance liens generally concern subcontractors and material suppliers.

An example of the limitations of an unpaid balance lien: The prime contract for the construction of the Acme MoonPie Plant in Mobile has a value of 1mil. You are the subcontractor responsible for landscaping. Your contract with the general contractor, Mr. Big, has a value of 50k. Upon completion of your work you submit your pay request for the full 50k. Upon receipt of your pay request Mr. Big has already been paid 975k from the owner. Only 25k remains to be paid to Mr. Big by the owner for retainage. If you are forced to lien to collect payment, the most you could ever recover from the property owner (if you submit your notice of intent to lien in time) is 25k. In other words, you would only be entitled to the unpaid balance due to the general contractor from the property owner.

Practice pointer: If you are one of the last subs on the job be aware that you may fall subject to an unpaid balance lien. At the first sign of payment problems, be prepared to serve a notice of intent to lien upon the property owner.

If you are considering your lien rights consult an attorney as soon as possible. Time limitations for filing liens can be as short as 30 days after leaving the job site.

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Posted On: July 26, 2009


Before you start your next project be sure to maintain the following list of documents in the event you are forced to file a claim on a payment bond in Alabama:

Copy of your contract and all change orders;
Invoices and delivery receipts;
Pay applications;
A statement of account;
Copies of all correspondence between the parties; and
Copies of all notices served upon any party regarding a payment demand/claim.

The surety will likely ask for these documents in order to process your claim.

In Alabama, most projects funded by tax dollars (public projects) require the purchase of a payment bond by the general contractor. Private projects do not have such a requirement.

Seek legal advice asap in the event you have not been paid on a construction project and must file a bond claim. Time limitations vary and may require quick action on your part.

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Posted On: July 9, 2009


Our firm is now handling a number of these claims on behalf of homeowners. See the below article by Steve Alexander from WKRG Channel 5 for more information:

"Imagine living in a home that makes you sick and causes your air conditioning to go out.
That's what several dozen people in Prichard say is happening to them, and they want help.
45 people are filing lawsuits over Chinese drywall in their homes in the Bessemer subdivision of Prichard.
Jerome Leland is one of those filing suit.
He said copper wiring in his house has turned black.
Leland's attorney, Gregory Vaughan, claims the drywall used in Leland's home and other homes is putting out harmful gases.
Vaughan said, "The drywall is off gassing sulphur into these homes, causing damage to a number of electrical systems."
Leland said he's had his his air conditioning system repaired many times, but it keeps breaking.
And that's not all.
Leland said, "My computer, my TV, my washer and dryer, my fire alarm system, all that stuff has been damaged. I had a question mark about a lot of things that were going on in my house, as far as the kids' nosebleeds, my upper respiratory problems."
Leland and Vaughan are suing the Prichard Housing Authority, The Mitchell Company, which built the houses, and suppliers.
Vaughan said, "We'd like to bring the parties together and see if we can't work it out."
Leland said, "I'm just really hoping that they'll do something about this as quick as possible because this is ridiculous."
Aside from this lawsuit, the Prichard Housing Authority is suing The Mitchell Company, and The Mitchell Company is suing Chinese and German suppliers."

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