PERFECTING YOUR MECHANIC'S LIEN

For years, the law in Tennessee was that in order for a contractor, subcontractor or supplier to have a lien for its work on real estate, the person had to comply with each and every requirement of the Mechanic's Lien Statute. For an outstanding discussion on this topic, see Andrews Distributing Co. v. Oak Square at Gatlinburg, 757 S.W.2d 663 (Tenn. 1988).

In 2007, the General Assembly amended the Mechanic's and Materialmen's Lien statutes and added the following provisions:

(a) This chapter is to be construed and applied liberally to secure the beneficial results, intents, and purposes of the chapter.

(b) Substantial compliance with this chapter is sufficient for the validity of liens arising under this chapter and to give jurisdiction to the court to enforce the liens.

(c) Any document required or permitted to be served, recorded or filed by this chapter that substantially satisfies the applicable requirements of this chapter is effective even if it has nonprejudicial errors or omissions.

This case is the first case to discuss the effect of this new law. Initially the court of appeals concludes that the new law applies because the contract at issue was executed in December, 2007 and the new law became effective in April, 2007. This issue existed because commencement of work on the project by another contractor occurred prior to April 2007.
Second, the Court of Appeals held that the following defects were not fatal to the lien:

(1) Failed to file its lien complaint under oath;

(2) Failed to timely join the successor trustee on the Deed of Trust;

(3) Failed to have an attachment issued, although an attachment was prayed for in the original complaint; and

(4) Failed to include a proper acknowledgment on its notice of lien.

Under the old law, each of these would have been fatal. Applying the new law's standard, the court of appeals held that none of these defects was fatal. Unfortunately, this opinion also leaves open the question of what defects will be fatal. Presumably, the limitations period remains absolute, but the other requirements are open to debate. This is a title insurance company's nightmare come true.

See Tri Am Construction, Inc., et al. v. J & V Development, Inc.