Louisiana Contractor License Exam — Study Guide

Louisiana state portion · Liens, claims, bonds and retainage

Introduction

Louisiana calls construction liens privileges and claims, and it handles private and public jobs under separate statutes. The Private Works Act, La. R.S. 9:4801 et seq., was rewritten by Act 325 of 2019, effective January 1, 2020; anything written before that may be wrong. The Public Works Act, La. R.S. 38:2241 et seq., governs claims on public projects, where you cannot lien public property and look to the bond and the retained funds instead. Most of the numbers in this chapter are deadlines.

Key numbers

Part A — Who has a privilege or claim on private work

When the owner contracts directly, these persons have a privilege on the immovable for the owner's obligations: contractors, for the price of their work; the owner's laborers or employees, for work at the site; sellers of movables that become part of the immovable or are consumed at the site; lessors of movables used at the site under a written lease; and professional consultants and subconsultants engaged by the owner (La. R.S. 9:4801).

When the work is done through a contractor, these persons have a claim against the owner and a claim against the contractor: subcontractors; laborers or employees of the contractor or a subcontractor; sellers to the contractor or subcontractor; lessors under written leases; and professional consultants engaged by the contractor or subcontractor (La. R.S. 9:4802(A)). The claim against the owner is secured by a privilege on the immovable (La. R.S. 9:4802(B)). The contractor must indemnify the owner for these claims (La. R.S. 9:4802(F)).

Definitions. A contractor contracts with an owner to perform all or part of a work; a general contractor contracts to perform all or substantially all of a work, or files a notice of contract that makes it one; a subcontractor contracts with a contractor, directly or through a chain of contracts (La. R.S. 9:4807, 4808(B)). "Owner" is broad: co-owners, lessees, usufructuaries and others with an interest qualify (La. R.S. 9:4806(A)).

The owner's protection: notice of contract plus bond. The owner is relieved of the 9:4802 claims and the privileges securing them when the general contractor gives and maintains the bond required by 9:4812 and notice of the contract with the bond attached is properly and timely filed under 9:4811 (La. R.S. 9:4802(C)). Unpaid subs and suppliers then look to the contractor and surety.

Part B — Notice of contract and the bond

A notice of contract between a general contractor and an owner is filed before the contractor begins work. It must be signed by the owner and contractor and contain a complete property description, the parties and mailing addresses, the price (or the method and an estimate), when payment is due, and a general description of the work (La. R.S. 9:4811(A)). All Private Works Act filings are made with the recorder of mortgages of the parish where the immovable is located (La. R.S. 9:4831(A)).

Big-job rule for the general contractor. A general contractor whose contract price is more than $100,000 has no privilege unless notice of the contract is timely filed, and cannot file a statement of claim or privilege for amounts due (La. R.S. 9:4811(D)).

The bond. To get the 9:4802(C) protection, the owner requires the general contractor to furnish a bond of a solvent surety, attached to the notice of contract. If the contract price is more than $100,000, the surety must be a company licensed in Louisiana. The bond may not be less than the price stated or estimated in the notice of contract (La. R.S. 9:4812(A), (B)). Extensions of time do not release the surety (La. R.S. 9:4812(E)(1)). A seller has a direct right to payment from the surety if it sends a notice of nonpayment no sooner than 45 days after delivery, remains unpaid at 90 days after delivery, and then sends a payment notice; the surety must pay within ten days (La. R.S. 9:4812(F)).

When privileges take effect. Privileges are effective against third persons from the earlier of filing the notice of contract or the visible start of work at the site. Surveying, design services, test piling, tree removal, fill dirt, demolition, clearing and grading do not count as starting work (La. R.S. 9:4820(A)). This matters for ranking against a lender's mortgage.

Part C — Preserving the claim: the deadlines

A notice of termination of the work is signed by the owner and certifies substantial completion, abandonment by the owner, the general contractor's default, or termination of the contract (La. R.S. 9:4822(E)). If the work has been substantially completed or abandoned, the owner must file a notice of termination within ten days of the general contractor's request (La. R.S. 9:4822(F)).

The filing deadline for the statement of claim or privilege depends on whether a notice of contract was filed and who you are (La. R.S. 9:4822):

The statement must be in writing and signed, reasonably identify the immovable, set out and reasonably itemize the amount and nature of the obligation, and identify the liable owner (La. R.S. 9:4822(H)). A street address and owner's name alone is not a sufficient property description (La. R.S. 9:4831(B)).

Extinguishment. A privilege or claim is extinguished if it is not preserved under 9:4822, if no suit is filed against the owner within one year after filing the statement, or if the underlying obligation is extinguished (La. R.S. 9:4823(A)). A claim against the contractor survives a missed filing if the statement was delivered to the contractor within the filing period, and survives a missed owner suit if suit against the contractor or surety is brought within one year after the filing period expires (La. R.S. 9:4823(B)). Filing a bond under 9:4835 also extinguishes the privilege (La. R.S. 9:4823(D), (E)).

Worked example. An owner and general contractor file a notice of contract with a bond. The owner files a notice of termination on April 4. A drywall subcontractor is owed $38,000. Because a notice of contract was filed, the sub has 30 days, until May 4, to file its statement and deliver a copy to the owner. The general contractor, if the owner still owes it money, has 60 days, until June 3. If instead no notice of contract had been filed and no notice of termination ever issued, every claimant would have 60 days from substantial completion. On residential work, a sub or supplier that sends the owner a notice of nonpayment inside that 60 days, and at least 10 days before filing, gets 70 days instead; the general contractor's own deadline stays at 60.

Part D — Public works: bond, claims and retainage

The Private Works Act does not apply to public works of the state or its agencies and political subdivisions (La. R.S. 9:4808(D)(3)). Public projects run on the Public Works Act.

Contract and payment bond. A public entity's contract over $5,000 for public works must be in writing and signed (with an emergency exception under $50,000). For each contract over $25,000 per project, the public entity must require a payment bond of not less than 50% of the contract price, recorded with the contract in the parish mortgage records within 30 days after work begins (La. R.S. 38:2241(A)). The payment terms of any bond on such a contract are read as statutory provisions and cannot be waived by contract (La. R.S. 38:2241(C), (F)).

Who is a claimant. Anyone owed money under a contract with the owner, a contractor or subcontractor for labor, materials or supplies for the work, including for-hire carriers delivering to the site, fuel and power for machines, lessors of movables under written leases, and surveyors, engineers and architects employed by the contractor or a sub (La. R.S. 38:2242(A)). A lessor must deliver a copy of the lease to the owner within ten days after the equipment first arrives at the site (La. R.S. 38:2242(C)(1)).

The 45-day sworn statement. After the claim matures and within 45 days after the recordation of acceptance of the work by the governing authority or of a notice of default, the claimant files a sworn statement of the amount due with the governing authority and records it with the parish recorder of mortgages (La. R.S. 38:2242(B)). If the authority makes final payment without deducting outstanding claims or getting a bond to cover them, the authority becomes liable for those claims (La. R.S. 38:2242(D)).

Lower-tier claimants. A claimant who contracted with a subcontractor but has no contract with the general contractor must, in addition to the sworn statement, give the general contractor written notice by registered or certified mail within 45 days of the recordation of acceptance or default (La. R.S. 38:2247(A)). A materialman who has not been paid by a subcontractor loses its privilege unless it sends notice of nonpayment to the general contractor and owner within 75 days from the last day of the month of delivery, or within the lien period if sooner (La. R.S. 38:2242(F)).

Suit on the bond must be brought against the surety, the contractor or both within one year from the registry of acceptance or notice of default (La. R.S. 38:2247(A)).

Retainage. A public contract may not let the public entity withhold more than 10% of the price on projects under $500,000, or 5% on projects of $500,000 or more, until 45 days after recordation of formal acceptance or notice of default (La. R.S. 38:2248(A)). The entity may not withhold more than the value of the punch list (La. R.S. 38:2248(B)(1)).

Worked example. A parish awards a $420,000 drainage contract. Minimum payment bond: 50% × $420,000 = $210,000. Maximum retainage: 10% × $420,000 = $42,000, because the contract is under $500,000. On a $900,000 contract the cap is 5% × $900,000 = $45,000. The parish records acceptance on September 2. A supplier to a subcontractor must file and record its sworn statement and send written notice to the general contractor by October 17 (45 days), and must sue on the bond within one year of September 2.

Why it works this way, and how it is asked. Public records protect people who were not at the table. A recorded notice of contract and bond tells every sub and supplier where to look for payment and tells the owner it will not pay twice. Strict deadlines then end the owner's exposure on a known date. Public property cannot be liened, so the bond and the retained funds replace the lien. This book's practice questions give one date and a role and ask for a deadline: first choose the clock (notice of termination or acceptance), then the role, then count days on a calendar.