You know the construction project is not going well when you are considering filing a construction lien. However, here is a little light at the end of the tunnel—you can now demand that the property owner pay you 12% annual interest on your claim from the date you filed your construction lien. A recent Nebraska Supreme Court decision made this right clear.
In Echo Group v. Lund Ross, the material supplier sold electrical materials to the electrical subcontractor to be installed in apartments. During the course of construction, the general contractor required all subcontractors to sign lien waivers indicating that all material suppliers had been paid. Upon return of the lien waivers, the general contractor would pay the subcontractor.
The electrical subcontractor, like the other subcontractors, executed the lien waivers and it was paid. The problem was that the electrical subcontractor was not paying the material supplier. To make matters worse, the electrical subcontractor then went out of business and ceased operations.
The material supplier filed construction liens on the three projects it had supplied materials, but had not yet been paid. The general contractor refused to pay the material supplier and the material supplier filed lawsuits seeking to foreclose its construction liens. In addition to seeking to foreclose the construction liens for cost of its materials, the electrical supplier also asked for 12% interest from the date of filing its construction liens.
The interest request is significant because the material supplier did not have a contract with the property owner that allowed for interest. Instead, the electrical supplier asked for interest based on the argument that the construction lien represented an instrument in writing on which money was due, like a contract or an invoice.
The Nebraska Supreme Court reviewed Nebraska’s Construction Lien Act and the statutes which allow interest and held, for the first time, that construction lien qualifies as an instrument in writing on which money is due. The court then allowed 12% interest on the electrical material supplier’s claim from the date of filing the construction lien.
How this impacts you: The court’s ruling will help you demand 12% interest on amounts owed under a construction lien. Unless you are the general contractor that contracted with the property owner, chances are good that you do not have an agreement with the owner of the property. Without an agreement with the owner of the property, you could not demand interest on your claim. Now, with this recent Nebraska case, you can demand 12% interest from the date you filed your construction lien.
If you would like help assessing your construction lien options, and how to best position yourself to get interest on your claim, we recommend you contact an experienced construction attorney.