J. Kent Holland, J.D.
ConstructionRisk, LLC
An engineer’s lien that was filed two years after commencement of the contractor’s construction of a project was not entitled to priority over a mortgage holder’s lien that was filed when construction first commenced. The court focused on language of the state’s lien statute that specified that an engineer’s lien does not attach unless and until the lien is duly filed of record with the circuit court. Crafton, Tull, Sparks & Associates v. Ruskin Heights, LLC, 453 S.W. 3d 667 (Ark. 2015).
The construction of a project was almost complete when the engineer filed an “Architect’s and Engineer’s Account and Affidavit of Account” stating that it was owed a little over $37,000. A couple months later, the engineer filed a lien against the property. A few months prior to that, however, the mortgage company had filed a foreclosure complaint alleging breach of the financing note by the project owner.
The engineer sought to have its lien declared superior to any lien or claims by the mortgage company. Although the trial court agreed that the engineering lien was valid, it found it lacked priority over the mortgage lien because the engineering lien did not relate back to the date of construction. The sole issue on appeal concerned whether the statute had been correctly interpreted and applied by the trial judge. Section 18–44–105, the engineer’s lien statute, provides as follows:
“(a) Every architect, engineer, surveyor, appraiser, landscaper, abstractor, or title insurance agent who shall do or perform any architectural, engineering, surveying, appraisal, landscaping, or abstracting services upon any land, or who shall issue a title insurance policy or provide landscaping supplies upon any land, building, erection, or improvement upon land, under or by virtue of any written agreement for the performance of the work with the owner thereof, or his or her agent, shall have a lien upon the land, building, erection, or improvement upon land to the extent of the agreed contract price or a reasonable price for those services.
(b)(1) However, the lien does not attach to the land, building, erection, or improvement upon land unless and until the lien is duly filed of record with the circuit clerk and recorder in the county in which the land, building, erection, or improvement is located.
(2) The lien shall be:
(A) Subject to the notice requirements of §§ 18–44–114 and 18–44–115;
(B) Filed under § 18–44–117; and
(C) Enforced under this subchapter.”
(Emphasis added.)
The court explained that lien statutes are in derogation of the common law and must be strictly construed. Given a strict interpretation of section 18-44-110 of the statute pertaining to the date to which the lien will relate back, the court concluded that any relate-back provisions in section 18-44-110 do not apply to engineer’s liens and do not allow for an engineer’s lien to relate back to the date of construction.
Comment: In reviewing design professional contracts we are noting that more and more frequently, project owners are attempting to obtain advance lien waivers as part of the contract terms and conditions. These may not be enforceable in all states, but we nevertheless seek to negotiate such advance waivers out of the deal. The next aspect to address is the partial lien releases. Specifically, care must be taken with the language of such releases so that the right to make claims or file liens is waived only as to work that has been invoiced prior to the date of the lien release.