Tennessee Contractors Affected by Mechanic's Lien Law Changes

Date Enacted:  April 20, 2015

Date Effective:  April 20, 2015

Tennessee Contractors Affected by Mechanic's Lien Law Changes


SB 877 TCA Title 66, Chapter 11 amends the Tennessee mechanic’s lien law and makes changes to contractors’ payment bond details. The revisions to Tennessee law attempt to make bonding and claim payouts a bit more straightforward for general contractors doing private work.

Amended Payment Bond Details

The mechanic’s lien act amends Tennessee’s mechanic’s lien law. These changes specifically affect prime (general) contractors who do private work and have posted a payment bond. The new law repeals the previous requirement that the bond pay for extras not included in the contract but authorized by the owner. This included things such as labor, materials, services, equipment, machinery, overhead, and profit. In the previous law, these extras could not be more than 15% of the prime contractor’s contract price.

In addition to removing the extras from bond amounts, changes to the claim process have been made. Claims on payment bonds provided for a project will not have to be filed in the county where the real property is located. The law states “where any portion of the real property is located,” so in some cases there may be more than one county that a claim could be filed in, adding flexibility to such claims.

Still Have Questions?

Payment bonds are often something contractors deal with when working on public or private projects. You may have purchased one before or you may be new to the business. Either way, you may have some lingering questions about what a payment bond really is. In short it’s an insurance policy for the project owner to protect them against legal action should you fail to pay subcontractors, laborers or suppliers.

If you’re wondering how much your bond premium will cost you, know that it’s hard to give an exact answer without your application. Bond premiums are largely dependent on your credit. The premium is a percentage of the total bond amount and for excellent credit, it will usually be around 1-3% of the bond.

Parting Thoughts

If a project owner has required a payment bond, it’s imperative that you avoid claims. A claim against your bond can be costly, both for your bottom line and your reputation. Remember that the bond is backed by your assets and you will be required to repay all claims.

Still need more info about this legislation? Read the full mechanics’ and materialmen’s lien act.
What are your thoughts on the new Tennessee mechanic’s lien law?