It’s not easy being a subcontractor, or the sub of a sub, and it gets even worse the farther down the chain you are. You do what you’re hired to do, using your labor and expertise and materials, and for the first three fourths of the work you’re paid on time. Then the prime contract tells you that the owner is not making payments and you are asked to keep working with the promise of payment when the project is done. If that promise is not fulfilled, what rights does a subcontractor have in Mississippi? Until last fall a subcontractor had one right and one only, a stop payment notice under § 85-7-181 of the Mississippi Code. That was a letter to the owner stating that the sub had not been paid and demanding that the owner refrain from paying the prime until the dispute was resolved. Today a subcontractor does not have that right because the U.S Circuit Court of Appeals for the Fifth Circuit found the stop payment notice unconstitutional in Noatex Corp. v. King Construction in a decision last fall.
The Mississippi State Legislature is now moving to address this problem with S.B. 2622 and that bill is currently in a Senate Committee. This bill gives all contractors, subcontractors and materialmen a lien for services and material provided, limited to the sum of the obligation owed. The lien must be filed within 90 days of the last work performed and it expires at the end of 180 days from the date of filing if a lawsuit to enforce the claim is not filed. The sub must serve the notice on the owner and the prime contractor. If there is a construction lender it would be good practice to serve the lender as well. This lien would be inferior to a previously filed construction deed of trust.
Will this bill be signed into law? Certainly subcontractors hope that it will. Construction lenders and prime contractors may oppose it. If you begin a construction process in the next few months as an owner, you need to be aware of these developments, too.