Speaker 1 00:00:11 This is Charlie. Welcome to the quick getting spruce podcast, where we talk about everything related to contractors, construction, and information to help you run better businesses. Hey guys, welcome back to the quickening screwed podcast. It's your host, Carolyn Crummins and we're back today with another state that we're covering in lien laws. We're going to cover all 50 states. And today we're going to talk about Arkansas and whether it's complicated or not, and the exact steps to do that. So today I have with me, Suzanne Clark of the Clark law firm. Good mornings. And how are you? Good.
Speaker 2 00:00:46 And it delighted to be with you this morning.
Speaker 1 00:00:49 Thank you so much. So tell us a little bit about yourself, your practice and how you got into construction law. Sure.
Speaker 2 00:00:54 Well, well, um, I was late actually to the legal field is second career for me. I went to law school in my forties, uh, but my, my background was engineering. I'm a chemical engineer by education spent almost 20 years in the semiconductor industry, uh, and then decided to do something completely different and went to law school and, uh, started with a large firm out of school, doing a lot of commercial litigation and wanted to, wanted to do my own. My own thing was a better fit for me to, to go out and started my firm, um, and just really kind of fell into it. I think that the engineering background is helpful in a lot of respects, even though I'm chemical as opposed to mechanical or civil, um, in a lot of, uh, litigation that includes some technical aspect. The engineering background is valuable and I started working with some clients, you know, some on contract matters that just sort of fed into where helping with lien issues were helping on that. Then we're getting involved in litigation and it's just grown organically where now my firm, we're probably doing 50, 60% of the practice is construction.
Speaker 1 00:01:59 Yeah. And it's really kind of its own each, uh, about like just specifically the construction industry is its own its own world. And so you really need a lawyer that is somewhat familiar with that background, right?
Speaker 2 00:02:10 Absolutely. Absolutely. And it's, it's a small group in Arkansas. There are, you know, there are several who, who focus on construction. Um, but I agree with you a hundred percent. It's, it's pretty specialized.
Speaker 1 00:02:21 So I'm a little bit curious. So what made you go from being in the field of the chemical engineer to law school? I, you know, I don't know if I would walk, want school on my, on my worst enemy.
Speaker 2 00:02:29 Yeah, it was, it was really a more of a lifestyle thing for me. Um, when I was in the semiconductor market, I was a, I was a VP over north American field operations, but I had kind of a global group because we had, uh, we had folks working in a lot of other countries and I traveled a ton and so much of that. Uh, so much of that industry is in, uh, China and Taiwan and Singapore and Korea. And I spent a lot of time overseas and it was wonderful and exciting for a while. And then it wasn't, I'm just kind of want, it wanted to be around with kids and grandkids and what's coming up and what my life is going to look like. And I'd always been kind of fascinated by the law legal practice. My husband is a lawyer. He was the attorney general in Arkansas for three years. Yeah. And uh, so one day I said, what would you think if I quit my job and went to law school and the rest is history,
Speaker 1 00:03:24 That's awesome. I'm glad you're here as a fellow, as a fellow woman in the construction industry, especially, you know, it just takes a minute for people to realize, okay, you do kind of know what you're talking about. Once you start using their lingo, they're like, okay, it's not automatic. Okay. So let's dive into Arkansas. First question. I always ask, do you have to be a licensed current contractor in Arkansas?
Speaker 2 00:03:46 Yes, you do. You do. And four in residential construction, anything over $2,000 requires a, uh, a license and in commercial, anything over $50,000 requires a license. And if you choose to operate without a license and, uh, and engage in construction practices, that it's pretty onerous. Uh, in terms of the penalties, the, uh, the licensing board obviously has got subpoena power and authority with regard to fines and that sort of thing. Um, but if you, if you actually perform work without a license, or if you are a GC and, and hire someone to do subcontract work that does not have a license, if you get into a dispute, you got a big old problem because you cannot Sue at all in contract or anything else. If you have, if you have employed someone who doesn't have a license, or if you yourself do not. And I've seen that bite even large contractors on big projects, especially out of state contractors, you know, great, big, huge project. They hire somebody out of state to come in. They've worked with somebody for years. Who's a great sub. They bring them in, but they don't go the extra step of being sure they've crossed those T's and dotted those I's. And, uh, and if you get into a payment dispute, you're out of luck.
Speaker 1 00:05:02 I was like, basically you're working for free. Then there's nothing you can do if you can't.
Speaker 2 00:05:09 That's the first thing, a defense lawyer who actually does construction law is gone.
Speaker 1 00:05:14 Exactly. Uh, so how do you know how, how hard it is to get licensed? Does it take a long time? Is it,
Speaker 2 00:05:19 Yeah, it's, it's not, it's not overwhelmingly difficult. It's a, there's a written test involved in it. You know, it's a, it's an application that just outlines the experience of the contractor, the work they've done, you've got to take a test for certain levels of, of contracting authority. Uh, so that they'll generally start at a low level, you know, in construction, in residential at, uh, you know, $50,000, uh, mark or something and move up. And in the, in the commercial side, it's a, it's a bit more stringent, but it's not, it's not overwhelmingly difficult.
Speaker 1 00:05:51 Okay. Well, that's good. Uh, all right. So who in Arkansas has lien rights? How is that defined?
Speaker 2 00:05:57 Yeah, almost, almost anybody who does any work on a construction project has got lien rights. So, uh, the first and foremost, you have to have a contract, uh, to do the work. Um, not for, not for, uh, contractors, subcontractors, material suppliers. You can prove the conduct, uh, contract through conduct. So kind of standard, you know, common law contract, contract law for professionals. If we are talking about architects, uh, engineers, uh, they have got to have a written contract to demonstrate the work on the project. And then any of those folks, uh, are entitled to file file for a lien on the property.
Speaker 1 00:06:38 Okay. So let's, is there any differences on how to file lien based on the type of project or the contractor or anything, or is it the same for all types?
Speaker 2 00:06:46 Well, it's, it's very different for residential. Uh, and that's, that's another area where Arkansas is really onerous. If you do not do what you're supposed to do. Uh, and there's, there's a, pre-construction notice in residential construction and that's for any construction under, under for residential units, if
Speaker 1 00:07:05 Or four units or under is residential
Speaker 2 00:07:07 That's right. Yeah. Anything above four is considered a commercial commercial project. So, but if you are doing residential construction, there is a notice that is statutory eight. You can't just have in your contract, we're entitled to file a lien against you. There is specific language in bold print that is supposed to be printed. Exactly that needs to be signed by the property owner, uh, before you commence construction, notifying them of your right to file a lien on the property. And if you, if you fail to get that notice and it's, you either have to have it signed personally, or it has to be served, uh, you know, just like you would service of a complaint, a legal complaint,
Speaker 1 00:07:51 So personal service,
Speaker 2 00:07:52 Then your hands. Exactly. Um, but if, if you fail to get that notice, and this is one of those things that con contractors, this has been in place since I think 79, but the number of residential contractors who are not even aware of it is really significant. Yeah. And the number of lawyers who aren't aware of it, there are liens filed all the time for work that's been done in the first thing you go is, did they file the notice? No done you can't, your lien rights are gone. Um, and it actually used to be up until last year, we had a legislative session last year that addressed a couple of different things in a construction law. And this was one of them, but that was another area where it, for the residential contractor, if you had not provided that, pre-construction notice the specific statutory pre-construction notice and obtain that signature. If the homeowner went south on you and just didn't pay the bill, you're out of luck. It, you not only lost your lien rights, you lost your contract rights. You couldn't Sue on the contract. Couldn't Sue in quantum marrow. It could not recover at all. Um, and so last year they did, they did modify, they amended that contract and you still lose your lien rights, but the contractor is now entitled to at least two on the contract, uh, in terms of trying to recover if, uh, if they don't receive payments.
Speaker 1 00:09:14 Okay. So that's four. So what if somebody that's hired by the contractor, like a sub contractor, do they have to have the owner sign it as well? Or can they be covered by the one with the,
Speaker 2 00:09:24 Yeah, really good question. Anybody, even, even if the GC doesn't, if the sub does anybody who's actually provided the notice, uh, any, anyone who would be entitled to lien rights gets the benefit of that.
Speaker 1 00:09:36 So the owner just has to sign it
Speaker 2 00:09:38 Once that's right. Okay. So, so then they are considered on notice and anybody else who would be entitled to file a lien can do so.
Speaker 1 00:09:46 Okay. So this is residential four units, and under the first step is before construction starts, the owner has to agree to this, to sign off on the specific language by statute. Correct. Okay. So let's say we've done. And that goes to the benefit of everyone that works on the project. So let's say we've done that. What is the next step on the residential side to,
Speaker 2 00:10:04 Um, on the residential side, it really is just a matter of placing the owner on notice of the demand for the lien. And, uh, and they have to, they have to receive notice of the intent to file the lien 10 days prior to actually filing the lien. So you've got to have proof of service and that's true in the, in the commercial side of things as well, is that in the, in the commercial liens, it follows the exact same process for what's required in filing the lien. But on the commercial side of things, you also have to have a, uh, a specific notice that is provided to the contractor or whoever is, or the sub, whoever is, is you're making the demand for money on has to receive a notice within 75 days of having performed the work at, at the job site of the amount of money that's due. And that's gotta be a specific accounting calling out the amount of the lane.
Speaker 1 00:11:05 Okay. So back on the residential side, we, you have, okay. So is there a deadline on the time that they have to file the lien on the residential side
Speaker 2 00:11:13 120 days? It's 120 days, whether it's commercial or residential, you've got 120 days to file a lien from the time that work has been, has been stopped. The last work that has been done on the project,
Speaker 1 00:11:26 The project overall. So it's basically 120 days from final completion or abandonment, or
Speaker 2 00:11:31 Depends on who's filing the lien. So if it's, if it's a sub it's, whoever is filing the lien, it's 120 days from when they have actually done the work. Whoever's making the command. Yeah. Who's done their last work and it's 120 days from that, from that date? No.
Speaker 1 00:11:46 So from 120 days from the last work on the residential side, and we got to send notice 10 days before that says, Hey, I'm, if I remain unpaid, I will file my lien in 10 days. And then it has to be filed within 120 days of the last time they worked. Exactly. Okay. And then on residential, once that lien is filed, how long do they have to enforce it? How long is it good for?
Speaker 2 00:12:06 It's 15 months. And so you've got to file suit within that time to have it extend beyond, beyond that.
Speaker 1 00:12:13 Gotcha. Okay. Okay. Um, and then the lien is filed with the county clerk, or what is it called?
Speaker 2 00:12:18 The Clark it's filed with the circuit clerk in the county where the property property.
Speaker 1 00:12:22 Gotcha. Gotcha. Okay. So you sit on commercial, it's a little different, they don't have, they don't have to have that original thing signed off on what did they have to do?
Speaker 2 00:12:31 Yeah, they there's, no, pre-construction notice on the commercial side because it's assumed that you're dealing with more sophisticated players, that they're going to understand that there are lien rights in place. And so the pre-construction notice is not required in the commercial side of things. Um, but they do accelerate things a little bit with the 75 days. You only got two and a half months from the time that, you know, you've, you've performed the work, um, which frankly creates some real issues. A lot of times for subcontractors on these, these projects, but you've got 75 days to make a demand on the, the owner or the GC for payment and document that. Uh, and then you also have to provide the 10 day notice to the owner. So, and you have to provide proof of those notices when you filed the lien within 120 days. So that timeline becomes really critical because you've got to get the notices out. You gotta have your proof of service and, and you've got to have all that ready to file within 120 days. So sometimes you have folks who are, you know, they're, they've been trying to get payment for two, three and four months. And, and then they're saying, well, gosh, you know, I need to file a lien. And, and unfortunately, if they're not paying attention to the specific specifics of it, they're out of luck.
Speaker 1 00:13:49 Let me ask you this on that side. So like, say they're late for like a certain month. Could they be valid for another month if they didn't?
Speaker 2 00:13:56 I just go back. That's what you tell them is if, even if you're not being paid, go back and do some more work. You may not have gotten paid last month, but what's in them and what needs to happen so that your timeline is going to kind of gigs.
Speaker 1 00:14:11 Well, yeah, so that's like in Texas, like the notices go from the first time you're owed money, not the last time you work. And so last time you work is when the lien has to be filed, but not the notice. This is all kind of confusing, but yeah. So definitely something to be concerned about there. So, okay. So after we filed the lien, do we have to send the notice owner, the, the, uh, notice to the owner that it was filed?
Speaker 2 00:14:34 No, not necessarily most folks do to fall follow through on everything, but that, but the, the, the lane itself has to include the notices. So it is, it's, it's presumed that the owner is on notice that they
Speaker 1 00:14:46 There's another one required after it's filed. Yeah.
Speaker 2 00:14:48 It, it, it is absolutely good practice to be sure.
Speaker 1 00:14:51 I agree. And like I tell my clients, you can never send notice too early or too often.
Speaker 2 00:14:56 Exactly. There's
Speaker 1 00:14:57 Only deadlines. You can always do more. And that's the whole thing. If you want to get paid faster, just send more notice. Right. Okay. So, and then, so if you don't get paid, you have 15 months to file suit. If you have to file suit, can you get your attorney's fees back? Yes.
Speaker 2 00:15:11 Yes. And, and there's a, there's a specific statute that allows for recovery of attorney's fees, for anyone who does have to file a lien. There's also, Arkansas has got a statute for anybody with a contract that prevailing party in any contract in Arkansas can recover attorney's fees. So
Speaker 1 00:15:28 If it's not written in the contract. Exactly,
Speaker 2 00:15:31 Exactly. So even oral contracts, you can recover attorney's fees. So, yeah. So, so that's pretty, that's pretty easy. Um, and I don't want to get ahead of you on, but where that becomes problematic is when folks are trying to bond around it or something, because, uh, because while attorney's fees are recoverable and it's referenced in the statute that a law allows you to bond off of it, the language is pretty ambiguous in terms of including any amount of fees in the bond. And that's something we, lawyers are fighting over all the time, anytime somebody is trying to bond around Elaine.
Speaker 1 00:16:08 Yeah. So that's interesting that you bring that up because I've had this happen to me, like in Texas, if you're going to file a bond, it's gotta be two and a half times, basically there's some specific formula of the lien. And the first time I sued an insurance company on the bond, um, I didn't realize that the, the surety is only liable for the face amount of the link cause that's their promise. And so now when I see a surety, I leave the owner in for the remainder of the fees. Yeah. Which try explaining that to a judge in law.
Speaker 2 00:16:40 Yeah. Used to Arkansas, used to have for the bond. It that the, the bond needed to be double the amount of the lien. Um, but then they changed it and said it would be in the amount of the lane. Cause folks argued. It was really onerous because sometimes if the lien is, you've got a $4 million lien and you're having to get a bond worth $8 million. Uh, and so the legislature changed it and said that the bond shall be in the amount of the lien. And then has another section that says, or such amount as the court may determine to include attorney's fees, blah, blah, blah. And so the, the fact that it's disjointed that way, it says, shall be in the amount of the lien. And it's filed with the circuit clerk. And the circuit clerk is supposed to determine if the bond is sufficient and discharged the lien. And so if you're including some, some ambiguous amount for attorney's fees, the circuit clerk is like, not my job, I'm not, you know,
Speaker 1 00:17:37 So that's a question too, that I should get better at asking, can you lien for attorney's fees and Arkansas, some states allow you, I can't do it here.
Speaker 2 00:17:44 Yeah. Not, not, not by itself. Uh, I mean, it's you, when you, when you're filing the action, the attorney's fees and, and you are, you are entitled to recover that judgment and become a lien that includes attorney's fees.
Speaker 1 00:17:59 Yeah. Gotcha. All right. Cool. Uh, okay. So let's get in to some materials, supplier questions, which always is always it's challenged. So like the first thing is incorporation, what level of incorporation, or does it a material supplier have to prove to have a lean
Speaker 2 00:18:14 Th the, the case law requires incorporation, but in terms of, in terms of proving it, as long as you can demonstrate that it was, it was delivered and you've got someone who is going to testify that there was, there was use of the materials that were delivered. You're going to be okay with it. You've got to have some amount of proof, but it's not, um,
Speaker 1 00:18:36 Too high. Yeah. It's different across all the states are very different. Like, oh, I think Oklahoma is like, you must prove it was actually used there. If not, you don't have a lien at all. Yeah. Um, so what about specially fabricated materials that aren't delivered? Can you lean for those? No, they got to actually go there. Yeah. Gotcha. All right. So what about leans on lease spaces?
Speaker 2 00:18:57 You can have liens on lease spaces for improvements that were done on the property, but you, you can't attach to the property itself, unless you have say a, uh, there's. The lessee has a contract with the owner that specifically describes that they've authorized them to do tenant improvements. If you've got a contractual tie in, then you can attach to the property itself. Um, but, but not, not unless, you know,
Speaker 1 00:19:29 Yeah. If not, you just have it against the lease interest. And here's a great yeah. Who knows what the lease says when you're finally. Exactly, exactly. And so what I've gotten in the habit of doing, if it's a tenant space, when I, uh, we sent an intent to lien, if you know, and I said, you know, I'm going to assume that this contract exists, unless you tell me the lease, unless you send me the lease to prove that it doesn't. And that means I'll move forward with a lien on the fee. And they think at all times you get all kinds of nasty, mad at me, but like I told you, you didn't wrong. Uh, okay. So let's dive in a little bit to public works projects in Arkansas and how, how that's different, how
Speaker 2 00:20:06 Sure. Yeah. You, you cannot have a lien on public public space, very similar in the federal federal context. But, um, so no public entities lien rights, but, but again, similar to the feds, you've got to post a bond. So anything above $50,000 for public works has got to have a bond, and that will be filed with the circuit clerk as well. Uh, so, so you're, you're then making the claim on the bond as opposed to
Speaker 1 00:20:33 Is the, is the notices kind of the same as the commercial
Speaker 2 00:20:36 D yes. There are, there are similar notices to make a demand. You've got to make a demand within 90 days on the bond. It says they got a little bit more time on the bond than you do with the notifying, the, um, uh, in the context of the lien. So you get 90 days to, to notify both the contractor and the surety of the demand on the, um, on the bond. And then you've got a year to file suit.
Speaker 1 00:21:00 Oh. Year to file suit after you make the claim. Yeah. Gotcha. That's awesome. So, and then the bonds filed a record. That's awesome. I wish they would do that here.
Speaker 2 00:21:09 Yeah. It's they are supposed to be there. There are times it's a little more difficult. The other side of it is if it's not what the circuit clerk, Arkansas has got a really robust freedom of information act law. And so, especially since it's a public entity, if you're, if you make a foyer request for pretty much everything having to do with the contract, you can generally get it.
Speaker 1 00:21:29 Yeah. We can't do it. It takes 30 days. And of course our clients don't come to us with 30 days notice requested from the entity, you know, it makes life a little challenging. So, um, another topic I like to hit on, if you have time, um, is the status of subcontracts. I kind of want to get your opinion on, on what you're seeing. How can we improve it? Because it's to be Frank, it's a bunch of bullshit.
Speaker 2 00:21:54 I, I could not have said it better. It is. I, I, if, if I'm representing a subcontractor, I hate him. If I'm representing the GC, it's a, it's a cakewalk because it really is that the subcontracts have gotten off the charts. I think in terms of pretty much waiving any rights they've got to recovery. And most of the time that they're written where it may not specifically call out a waiver of lien rights, but because it's, until you can prove that I've gotten paid for this, you can't make any demand. And most of the time that's going to take them outside of the last work that they performed. So from a practical perspective, they've, they've lost their ability to file a lien. Um, but, but the subcontracts have gotten a little bit crazy, I think in terms of, uh, one way contracting. And a lot of times these subcontractors are small businesses. They're, you know, it's, they're not in the position to, to really negotiate their way around some of the things that I might say, let's, let's not do this. Uh, and they're in that, take it or leave it spot. And they, it's not a good situation.
Speaker 1 00:23:03 No, no, I agree. I agree. I'm on a mission to change it. And that's actually where the, where the title came from. It's a book you can get on Amazon and it's got like all the in plain English, the bad shit you can find into subcontract, just because I'm trying, I'm trying to make a little difference out here. At least they know what they're signing. Somebody will start pushing back just cause it's so horrible. Oh, um, so I was going to ask you to, can you pre waive your lien rights in Arkansas?
Speaker 2 00:23:30 Yeah, there is. There's nothing specifically barring it in the private context, but, but like with most waivers, it needs to be a real knowing waiver. But, but that's why I say for contract rights, um, you know, with, with what GCs are doing with subcontractors, that's a, that's a real, it's a real challenge to try to say that you didn't know what you were doing.
Speaker 1 00:23:53 Yeah, exactly. Um, and that's why I think having a consistent collection strategy before you even decide to extend credit, which includes your lien rights. Like, like, okay. You know, your, your preliminary notice, you know, on the presidential 20 days on commercial yet seventy-five days of last work, but you could send it earlier. Yeah. You know, you know what I'm saying? Especially depending on your cashflow, right. That's right. And from what I found, the squeaky wheel always gets paid first. Yes. And the more squeaky you can be, the more likely are you. All right. So one last question. Do you have a favorite client story you'd like to share with us?
Speaker 2 00:24:26 Oh goodness.
Speaker 1 00:24:27 Oh goodness. And I'm sure you have, I'm sure you have good ones.
Speaker 2 00:24:30 Yeah. Well, my, my, my favorite one, uh, yes, my favorite one was, uh, a, uh, a case I had here. Right, right in Fayetteville actually, uh, that I had in litigation for over five years. And, uh, it was a, a large, uh, with this Fayetteville has, is a university of Arkansas. And so there's a lot of student, student housing and it was a, uh, 600 unit apartment complex, uh, that was built here. And I represented the property owner in this one, um, and, and really got involved exactly because there were some lien issues. Subcontractors were not being paid. You know, they were S they were placing liens on the property. So we were dealing with what was going on with their lender and everything else to get things bonded off. Uh, and it was clear, there was a problem during that process with the GC.
Speaker 2 00:25:19 Well, they came back to me about a year later saying, I think we got to Sue our GC yet. They were trying to flip the property and discovered all kinds of defects, uh, associated with the construction. And we sued the, we sued the GC and the bonding company. And it was one of those cases where they sit there saying you don't have a case. You don't have a case. We'll offer you a couple of hundred thousand dollars and five years later, we, and I'm not speaking out of school because we did not have a, uh, uh, confidentiality provision, but we got 14 and a half million dollars without going to trial on settlement. So I was after, after the five years of that, uh, and the back and forth that we'd had, I was celebrating for a few weeks on that.
Speaker 1 00:26:04 Oh, absolutely. Absolutely. That's awesome. Well, it's been so great to have you on the show. I'm sure we'll have on again. We can dive more into subcontracts and you know, all the terrible things in there, but thanks for so much for being here.
Speaker 2 00:26:16 Thank you for having me. I appreciate it.
Speaker 1 00:26:20 Thank you for listening to this episode of quick getting screwed. I hope you found it helpful if you liked what you hear, please like us and follow our podcast. Do you want further information? So you can find
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