CHAPTER 7 MECHANIC'S, MATERIALMEN'S, AND OTHER STATUTORY LIENS
| Jurisdiction | United States |
(Feb 2010)
MECHANIC'S, MATERIALMEN'S, AND OTHER STATUTORY LIENS
Peter D. Robinson
Holme Roberts & Owen LLP
Denver, Colorado
Lynn P. Hendrix is a partner in the Denver office of Holme Roberts & Owen LLP. Lynn maintains a multi-disciplinary transactional practice relating to a variety of types of property and industries, with particular emphasis on energy and natural resources law, intellectual property law (including trade secrets, copyrights, patents and trademarks), and finance and lending law. Lynn also counsels clients, from individuals to large corporations, on general commercial and corporate law. The breadth and depth of Lynn's practice allows him to bring unique ideas, concepts and solutions to transactions and business relationships. Since 1978, Lynn has represented clients in virtually all types of transactions, including mergers, acquisitions, financing, alliances, ventures and other commercial transactions. Lynn's energy and natural resources practice includes mergers, acquisitions and financing, as well as day-to-day business matters, primarily in the oil and gas and mining industries. These matters have involved both producing and nonproducing properties, gas plants, refineries, transportation and gathering systems and facilities, and exploration and production activities. Lynn also is involved in alternative energy projects, including ethanol, wind and synthetic fuel. Lynn's intellectual property law practice emphasizes software, computer technology and the Internet as well as a variety of other technologies and processes. Lynn is a registered patent attorney with the United States Patent and Trademark Office. He has negotiated major software and hardware contracts related to operations in the U.S., Europe, South America and the Pacific Rim, including supply agreements, development agreements, integration agreements, license agreements, service-level agreements and strategic alliances. He has also been in charge of significant trademark programs involving most of South America and parts of Europe, as well as the United States. Lynn has represented banks, borrowers and investors in a variety of lending and other finance transactions, with a particular expertise in financing involving energy and natural resources and intellectual property. Lynn also devotes significant time to representing clients in general, commercial and corporate transactions in a variety of industries, and has significant experience in matters involving real property laws and the Uniform Commercial Code. Lynn has authored several articles on intellectual property, energy and natural resources, and finance and lending law. In particular, he has authored or co-authored six law review articles and lectures on a variety of issues relating to intellectual property, energy and natural resources and finance.
Peter D. Robinson is an associate in the Denver office of the law firm of Holme Roberts & Owen LLP. His practice includes assisting clients with the legal aspects and documentation of oil and gas mergers, acquisitions, divestitures, financings and other exploration and development operations. Born and raised in Casper, Wyoming, Peter has a B.A. degree from the University of Wyoming and a law degree from the University of Virginia.
TABLE OF CONTENTS
I. INTRODUCTION
II. INDIVIDUAL STATES
1. Alabama
2. Alaska
3. Arkansas
4. California
5. Colorado
6. Idaho
7. Illinois
8. Indiana
9. Kansas
10. Kentucky
11. Louisiana
12. Michigan
13. Mississippi
14. Montana
15. Nebraska
16. Nevada
17. New Mexico
18. New York
19. North Dakota
20. Ohio
21. Oklahoma
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22. Pennsylvania
23. Texas
24. Utah
25. Washington
26. West Virginia
27. Wyoming
III. CONCLUSION
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I. INTRODUCTION
Mechanics', materialmen's, laborers' and other such statutory liens grant automatic liens to persons or entities that perform labor or provide services or materials to owners of real property.1 Although these liens typically require recordation in the real property records, and often require notice to the property owner, their automatic attachment is a particularly useful feature in the oil and gas industry. In an industry where operations frequently have to happen quickly, and often occur with minimal paperwork or up-front payment, a device that provides security to providers of labor, services and materials benefits both the landowner and the provider. These liens secure the claimants' rights to the properties and allow the property owner to contract for labor, services and materials without the paperwork associated with granting and perfecting contractual liens. An understanding of how these statutes operate in the context of oil and gas operations is critical to the ability to effectively and efficiently perfect these statutory liens.
The purpose of this article is to provide a brief survey of oil and gas mechanics' liens, or the application of general mechanics' liens to oil and gas operations, in twenty-seven producing states.2 In order to address some of the key substantive and procedural components to oil and gas lien statutes and to general mechanics' lien statutes as they apply to the oil and gas industry, and to present the information in an accessible format that permits quick comparisons between states, this article addresses the following questions:
A. Does the state have a specific oil and gas lien statute or just a general mechanics' lien statute? If there is a specific statute, is that statute the exclusive lien remedy or can the general statute be relied upon as well? Must the general statute be complied with also?
Many general mechanics' lien statutes do not clearly apply to a variety of oil and gas operations that may not "improve" the land, or do not involve constructing any buildings or structures. This can produce difficulties when trying to perfect liens securing work performed or services or materials supplied in the oil and gas context.3 The difficulties in applying general mechanics' lien statutes to oil and gas operations is highlighted by the fact that of the twenty-seven states surveyed in this article,4 sixteen of them have specific oil and gas lien statutes, and
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another three specifically include oil and gas operations in the general mechanics' lien statute. Whether a state has a specific oil and gas lien statute is a central question because, even if, as in most cases, the oil and gas lien statute is not the exclusive remedy for a claimant, it is often best tailored to protect the interests of a claimant in the oil and gas industry. In addition, it is important to know whether compliance with the oil and gas lien statute alone is sufficient, or if the general statute must be complied with as well. Many of the states incorporate, either explicitly, or through the absence of adequate detail, the provisions of the state's general mechanics' lien statute.
B. What type of services or materials are covered? What type of contract is necessary to give rise to a mechanics' lien?
This is a threshold question. Especially in states without a specific oil and gas lien statute, it is important to determine whether the labor performed, or the materials or services furnished, fall within the ambit of the statute. If there is a specific oil and gas lien statute the chances are better that all of the labor performed or services or materials supplied will fall within the coverage of the statute, but it is still important to check to make sure that a lien can attach for the types of labor performed and services or materials provided. It is also important to make sure that the contractual relationship between the debtor and the claimant is sufficient to give rise to a lien. In most states any enforceable contract is sufficient.
C. Where does the lien statement need to be filed? Does notice of an intent to file have to be sent to debtor first?
One of the primary values of a mechanics' lien is that it burdens real property interests. As a result of this impact on real property interests, in all the states included in this article, a lien statement must be recorded in the real property records where the encumbered property is located. In addition to filing a lien statement in the real property records, many states also require that notice be sent to the debtor. In some states, this notice must be sent prior to filing the lien statement, in others the only notice requirement is that the lien statement be sent to the debtor within some period after filing, and in others there is no notice requirement at all. Notice requirements are more frequent when the claimant is not the original contractor because there is greater concern that the owner may not know whether a subcontractor has a lien on the property unless specifically notified.
D. Is there a specific form/type of information required to be filed?
Some states provide a statutory form of lien statement. Most states do not provide a specific form, but all of them list certain items that must be included in the lien statement and many require that the lien statement be notarized or verified by affidavit.
E. When can the lien statement be filed? When does the lien statement have to be filed? When does a suit to recover on the lien have to be commenced?
In most states a lien statement can be filed as soon as the lien attaches. All of the states surveyed in this article have a deadline, ranging from sixty days to eight months, by which a lien statement must be filed. In addition, most states have another deadline by which an action to foreclose on the filed lien must be commenced.
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F. What is the result of not filing properly?
Oil and gas and mechanics' liens are statutory creations and so compliance with the statutes is necessary for the validity of the liens. Most of the statutes, or case law interpreting the statutes...
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