Key point. Materialman's liens can come as an unpleasant surprise to church leaders. The church may be required to pay twice for materials used in a construction project.
Church treasurers should be familiar with materialman's liens. A materialman's lien is a lien imposed by most states on property owners to secure payment for materials provided by suppliers in connection with construction projects. The basic idea is this—if a supplier of construction materials is not paid by the general contractor, then the property owner will be legally obligated to pay the supplier directly for the materials even if it previously paid the contractor for them. A recent case illustrates an important limitation on materialman's liens,
Facts of the case
A supplier provided materials to a church in connection with a construction project. Before each delivery the supplier sent the church a letter notifying it of the delivery and warning it that if the general contractor failed to pay for the materials then the supplier "could claim a lien against the church's property for which the church would be responsible." When the general contractor failed to pay the supplier for the materials, the supplier sued the church to enforce its materialman's lien.
The court's ruling
A court agreed that the church had to pay the supplier for the full value of the delivered materials, even though the church previously had paid the general contractor for the same materials. However, the supplier wanted more. It asked the court to order the church to pay its attorney's fees incurred in enforcing the lien plus finance charges. The court said no. While a supplier of materials is legally entitled to recover the full value of delivered materials under a materialman's lien, it cannot obtain more (including attorney's fees and finance charges) unless specifically authorized by statute or contract.
What this means for churches
Church treasurers can reduce if not eliminate the risk of double payment for construction supplies by taking the following steps:
- Withhold all payments to a general contractor in any construction project until "lien waivers" (signed by all material suppliers) are presented. The same is true for construction laborers.
- Insist upon a construction contract.
- Incorporate the lien waiver requirement into the contract.
- Be sure that the materialman's lien is restricted to the price of delivered materials, and does not include attorney's fees, finance charges, or other "add ons."
- Retain a local attorney to draft (or review) the construction contract, and have the attorney review the materialman's lien procedures under your state law. And, if your church is ever sued by a supplier seeking to enforce a materialman's lien, remember that the supplier may not be able to recover attorney's fees or finance charges. Sherman v. Greater Mt. Olive Baptist Church, 678 So.2d 156 (Ala. App. 1996).