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What is a labor lien and how can it impact my business?

For individuals and businesses in Louisiana who are engaged in commercial real estate and development, issues with contractors, building projects and labor liens may arise. Questions concerning what a labor's lien is and how it can impact your business may come up from time to time and understanding how a labor's lien works can be important. In general, a labor's lien is a lien placed on property by a contractor or other vendor who has performed work on the property. The labor's lien is used to ensure the contractor receives payment on the contract for the project.

If the contractor does not receive payment by the date noted in the invoice for the work, a labor's lien can be filed against the property with the local government. The lien provides the contractor with a security interest in the property for the unpaid payment. Once the payment has been paid, the contractor must release the labor's lien interest in the property to clear the title on the property. Either a conditional or unconditional release may be used, so it is important to be familiar with the particulars of each type of release.

There are certain requirements associated with a labor's lien, so it is important to be familiar with the requirements and the ins and outs of a labor's lien. If the parties do not have a contract, the contractor, subcontractor or supplier must file a preliminary notice before the labor's lien will be enforced. Typically, lien enforcement terms are included in a contract. There is a specified time frame, which varies by state, to enforce a labor's lien following the completion of any project. The project is considered complete when the owner acknowledges completion or begins using the property or improvements to the property that are the subject of the lien.

Commercial real estate projects can be both fun and challenging and are excellent growth opportunities for any business. Because there are a number of parties involved with a commercial real estate project and a variety of different legal aspects associated with one, they can also be complicated. If you need help understanding a business contract, you may find it helpful to contact a commercial law attorney to assist you.

Source: Smallbusiness.chron.com, "What Is a Labor Lien?," Accessed Oct. 24, 2016

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Dale M. Maas, Attorney at Law
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