On May 21, 2018, the Legislature enacted a law related to real property lien disputes with some real teeth. (Picture the movie poster for Jaws.)
That statute is Tenn. Code Ann. § 66-21-108.
The law provides that, if a real property owner prevails in challenging a lien, the owner “shall recover” all of the following:
- The owner’s reasonable attorney’s fees;
- Reasonable costs incurred by the owner to challenge the validity of the lien;
- Liquidated damages in an amount equal to ten percent (10%) of the fair market value of the property not to exceed one hundred thousand dollars ($100,000); and
- Any actual damages incurred by the owner.
What’s significant about this statute is all the punishments it creates for a party losing a lien dispute. It creates a statutory basis for attorneys fees (remember, Tennessee is an “American Rule” state) and also creates a statutory basis for pretty hefty liquidated damages (remember, Tennessee courts don’t favor liquidated damages provisions).
And, in case that’s not enough, don’t overlook that this statute appears to impose these double penalties on a “strict liability” basis, meaning that there needs to be no showing of bad faith. Instead, all that the property owner needs to do is: (1) prevail; and (2) that’s it.
So, if you’re the property owner, you’ll love this statute. If you’re a contractor or represent lien claimants, you’re probably going to think about this statute when you file any lien claim.