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Contingent Payments and Liens in Tennessee Part 2

Senate Bill 324 is designed to eliminate some common areas of contention in the Tennessee construction industry, including:

  • Eliminating contingent payment provisions 
  • Increasing the duration of subcontractor lien deadlines
  • Lessening the amount of time retainage can be withheld 

In part one, we discussed the first point, eliminating contingent payment provisions, and how it will affect contractors and subcontractors. As it stands, it seems as though Senate Bill 324 could benefit subcontractors while potentially hindering some contractors. That said, doing away with “pay if paid” clauses would force contractors to vet owners more fully to ensure that their valuable construction services are only provided to owners with integrity (and deep pockets).

Now, a Knoxville construction attorney will discuss the two deadlines that will be updated if Senate Bill 324 is passed and the effect it will have on contractors. Remember, for all of your construction-related legal needs, count on the Knoxville construction attorneys from Cotney Construction Law. Our attorneys have been providing a broad range of legal services to construction professionals for years, including contract review, license defense, lien law, and more.

Extending Lien Recording Deadlines for Subcontractors

Another significant change proposed by Senate Bill 324 is the enforcement of pre-work notices and extension of recording deadlines for subcontractor liens. Tennessee construction law, as it is currently written, has no such provision. This is an interesting change because forcing subcontractors to furnish a pre-work notice further complicates the lien process, but extending the deadline decreases the amount of pressure on subcontractors. Despite these changes, a subcontractors best chance of perfecting a lien resides with a Knoxville construction attorney. For the sake of comparison, here’s a brief outline of Tennessee’s existing lien law:

  • Subcontractors are required to serve a Notice of Nonpayment within 90 days of the last day of the month in which provisions of labor or materials were provided.
  • Subcontractors are required to serve a Notice of Nonpayment for each month they are not paid.
  • Subcontractors must file a Notice of Lien within 90 days of project completion.
  • Subcontractors must enforce the lien within 90 days of service the Notice of Lien.

Reducing the Amount of Time Retainage Can Be Withheld

Lastly, Senate Bill 324 aims to lessen the amount of time retainage can be legally withheld on a project. As it stands, up to five percent of the total contract price can be held as retainage to ensure that contractors and subcontractors are maintaining contractual compliance. Retainage can be held for as long as 90 days past the date of substantial completion. Senate Bill 324 aims to reduce this number to only 30 days. The other part of the law, which requires contractors to release retainage to subcontractors within 10 days after receiving funds in retainage, would remain the same. 

If you would like to speak with one of our Knoxville construction attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.