THE OKLAHOMA BAR JOURNAL 16 | JUNE 2024 right to file a lien, it is not prohibited from filing its lien solely based upon the fact that an original subcontractor had waived its right in its subcontract with the original contractor.38 ACTION TO FORECLOSE A MECHANIC’S LIEN An action to foreclose a mechanic’s lien must be filed within one year of filing the lien statement.39 A reasonable attorney fee is recoverable by the prevailing party.40 DISCHARGE OF A MECHANIC’S LIEN A mechanic’s lien is discharged by operation of law “one year after the lapse of one (1) year from the filing of the lien if no action to foreclose or adjudicate the lien has been instituted.”41 Thus, after one year following the filing of the lien, title examiners will simply disregard the filing of the lien when no foreclosure action has been filed, even without a filed release of the lien and even without a judicial determination that the lien is no longer valid. Because of the one-year filing deadline for a lien and the lack of a need for a lien release after one year, waiting and hoping that a lien claimant will fail to file a lien foreclosure action is a common tactic of landowners, especially when the landowner feels the lien claimant has filed the lien without justification and the lien claimant is merely trying to strong-arm the landowner into paying money that is not owed. Title Standard 24.10 provides this caveat: “If suit to foreclose or adjudicate the lien is timely instituted and the case is dismissed other than on the merits, or if a judgment in favor of plaintiff is reversed, the plaintiff shall have one (1) year from the date of dismissal or reversal to institute a new action.”42 A property owner may discharge a mechanic’s lien by posting a bond or cash for 125% of the lien claim.43 If a bond is used, it must be a corporate surety bond. In addition to the bond, the property owner must provide the county clerk with a $5 filing fee and a notice containing the number of the lien claim, the name of the lien claimant, the name of the property owner, the name of the debtor (if other than the property owner), a property description and the amount of cash deposited or, if a bond is filed, the names of the principal and surety and the amount of the bond. The county clerk is required to mail the notice to the lien claimant within three days. The lien claimant has 10 days after the mailing to file written objections limited only to its formal aspects, the amount of the bond and the sufficiency or authority of the surety. If any objections are filed, the county clerk conducts a hearing to rule on them. If no objections are filed or the objections are overruled, the mechanic’s lien is released of record, and the cash deposit or bond will stand in lieu of the extinguished mechanic’s lien. PROBLEMS WITH BONDS The obvious purpose of the requirement that the bond be for 125% of the lien amount is to provide an extra 25% to cover the lien claimant’s attorney fees and costs. This extra 25% may be sufficient for liens of significant amounts, but for liens of lesser amounts, the extra 25% is usually insufficient. For example, a lien for $1,000,000 will require a bond of $1,250,000, which provides an extra $250,000 to cover the claimant’s attorney fees and costs (which will be more than sufficient in all but the most complex cases). However, a lien for $10,000 will require a bond of $12,500, which provides only $2,500 for attorney fees and costs (which will be insufficient in almost every case).44 Because of this, including a claim for attorney fees and interest in the lien amount is helpful to secure a higher bond. For example, in H2K, “The [lien] statement claims a lien in the amount of $120,780.00 plus interest after March 6, 2019, at a monthly rate of 1.5%, plus attorney fees and filing costs.”45 The defendant originally posted a bond of only $150,975 (125% of $120,780), but “after [the lien claimant] objected to the bond amount, an additional $14,535.00 was placed into a trust account” to serve as an additional bond.46 OKLAHOMA’S TRUST FUND STATUTES Oklahoma has adopted two statutes (42 Okla. Stat. §§152-153, commonly known as Oklahoma’s Trust Fund Statutes) that declare that certain payments are held in trust for the payment of all “lienable claims due and owing or to become due and owing.”47 These statutes are in addition to lien rights, and they create personal liability for officers/managers of an entity that fails to ensure that trust funds are used to pay lienable claims. For more information on this topic, see Kevin F. Frates’s article in the Oklahoma Bar Journal article referenced.48 CONCLUSION Leveraging rights in Oklahoma’s construction landscape requires a comprehensive understanding of Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.
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