Contractual Lien Waivers To Become Illegal in Tennessee on July 1 ASA
NASHVILLE, Tenn. - Thanks to the efforts of American Subcontractors Association (ASA) members in Tennessee, construction contractors and subcontractors no longer can be contractually required to relinquish their mechanic's lien rights. After ASA members called for reform, on May 19, Gov. Phil Bredesen (D) signed H.B. 743, amending Section 66-11-124 of the Tennessee Code to state that "Any contract provision that purports to waive any right of lien under this chapter is void and unenforceable as against the public policy of this state."
"The importance of the legislation," said ASA of Middle Tennessee (ASAMT) Government Relations Chairman Robert E. Lee, "is that, by state law, subcontractors can't lose their rights to file mechanic's liens just by agreeing to take on work. Tennessee subcontractors wanted to put an end to that abusive practice, which totally denied them their rights. Legislators agreed that contractors and subcontractors were being manipulated out of the security that mechanic's liens provide."
In states that permit them, contractual lien waivers are contract provisions that completely and permanently remove a contractor's or subcontractor's ability to file a mechanic's lien, even if the client refuses to pay. Where contractual lien waivers are prohibited, contractors and subcontractors can still relinquish their mechanic's lien rights, but not through a contract agreement. For example, many clients ask for contractors and subcontractors for partial lien waivers when they pay them for portions of work that have been completed.
Rep. Charles Curtiss (D-43) introduced the legislation in the Tennessee House and Sen. Don McLeary (D-27) introduced a companion bill in the Senate. When legislators sought to understand the extent of the problem of contractual lien waivers, ASAMT and ASA of West Tennessee (ASAWT) asked ASA members in the state to send examples of contractual lien waivers to Rep. Curtiss. The response was immediate and convincing. The legislation passed both chambers unanimously, and will take effect on July 1, 2005.
ASAMT is in the business of promoting programs, education, and services for an environment in which subcontractors, specialty trade contractors, suppliers, and their associates can operate profitably. For more information, call (625) 523-2157. |
