January 30, 2014
Mississippi could soon greatly expand its application of lien rights to include subcontractors and materials suppliers by enacting a bill modeled on Georgia's lien statute, according to Chris Ring of NACM's Secured Transaction Services (STS).
Two bills were filed, one in the Mississippi House of Representatives and one in the State Senate, in response to a ruling last year by the U.S. Fifth Circuit Court of Appeals in Mississippi that affirmed a lower court's ruling that found the state's Stop Notice statute unconstitutional. The ruling stripped away a valuable payment protection for subcontractors and suppliers. Previously, "you could file what's referred to either as a stop notice or a public improvement lien, which put a lien on the funds that are owed from the owner to the general contractor," Ring said. "What that did for subs and materials suppliers is it gave them the ability to put pressure on the GC. It wasn't liening property, it was pressuring the GC so that you were getting paid, and then that was stripped away. Now, if you don't have a direct contract with the owner, you don't have anything."
Subcontractors and suppliers in the state are fighting to enact a new lien statute via either Senate Bill 2622 or House Bill 744. The Senate bill is expected to come up for a vote in committee on January 30, but even if the bill succeeds, it still has to pass through the House and through the full Senate as well, so supporters will have some time to voice their support for the enactment of the new statute.
Due to some idiosyncrasies in the Mississippi legislative system that provide for bill substitutions, when companies and credit professionals contact their legislators to support the enactment of a new lien statute in the state, they should refer to the Georgia-based lien law in any communications, as this statute is viewed as more favorable to subs and suppliers than a competing effort to amend either of the two bills to resemble Alabama's lien statute. Specifying the Georgia-based statute is critical to making the voice of subs and suppliers heard.
While subcontractors seem to be driving the conversation surrounding the bill, and sources on the ground inform STS that opponents of the new statute have been successfully working to find common ground with the subcontractor and materials supplier community, Ring notes that GCs and owners that oppose establishing effective lien protections for subs and suppliers are missing the point. "Who does the vast majority of lending on these projects?" Ring asked. "Banks obviously lend on these, but they're obviously being funded on the credit that subcontractors and materials suppliers provide as well. If you strip away their rights that they have on the money they're lending, that just means that less private jobs are going to be started in Mississippi. That's what owners and GCs should be extremely worried about."
NACM's STS will provide regular updates on the Mississippi lien law bill as more information becomes available.