Mississippi

Lien Waivers

Mississippi has strict requirements for lien waivers, and parties must use specific statutory forms provided under Miss. Code Ann. § 85-7-433. These forms must be followed closely, including notarization and statutory language requirements, to be considered valid and enforceable.

Statutory Waiver Forms

Mississippi provides two lien waiver forms:

• Interim Waiver and Release Upon Payment – Used for progress payments (§ 85-7-433(1))
• Waiver and Release Upon Final Payment – Used for final payment at the completion of the work (§ 85-7-433(2))

Each form must:

• Be notarized.
• Include statutory notice language: that after 60 days from the waiver date, the party is conclusively deemed paid unless an Affidavit of Nonpayment is filed.
• Follow the statutory form closely, or risk being rendered unenforceable.

Affidavit of Nonpayment (§ 85-7-433(3))

If payment is not actually received within 60 days of the date on a signed waiver, the claimant may file an Affidavit of Nonpayment to preserve lien rights. This affidavit:

• Must be notarized and filed with the chancery clerk.
• Must be sent to the owner within 2 days of filing.
• Revokes the waiver and reinstates the claimant’s right to file a lien.

Enforceability Limitations

• Mississippi does not allow advance lien waivers (before labor or material is provided) under § 85-7-419.
• Generic, non-statutory waiver forms (e.g., from other states or templates) may be deemed invalid if they do not substantially comply with § 85-7-433.

Best Practices for Lenders

• Require the use of statutory waiver forms at all applicable payment milestones.
• Verify all lien waivers are notarized and contain the correct 60-day notice language.
• Do not treat a signed waiver as final until the 60-day period has passed or payment is confirmed.
• Track the 60-day post-waiver window and monitor for Affidavits of Nonpayment.
• Retain copies of all waivers and related filings in the construction loan file.

Statutory Lien Forms

Mississippi law provides several statutory forms under Miss. Code Ann. § 85-7-433 that are required for lien-related processes. These forms are critical to maintaining and contesting lien rights and must be completed and filed according to the procedures outlined in the lien statutes.

Required Statutory Forms

1. Interim Waiver and Release Upon Payment – Used when partial payment is made for labor or materials furnished. It waives lien rights through a specific date (§ 85-7-433(1)).
2. Waiver and Release Upon Final Payment – Used to waive all remaining lien rights upon receipt of final payment for work completed (§ 85-7-433(2)).
3. Affidavit of Nonpayment – Used to nullify a previously signed lien waiver if payment has not been received within 60 days. This must be filed with the chancery clerk and served on the owner within 2 days of filing (§ 85-7-433(3)).
4. Notice of Contest of Lien – A form used by the property owner to contest a lien and shorten the period during which a lien claimant must file a lawsuit to enforce the lien to 90 days (§ 85-7-423).
5. Pre-Lien Notice to Owner – Required for subcontractors and suppliers without a direct contract with the property owner. This notice must be served at least 10 days before filing a lien (§ 85-7-409(3)).

Filing and Use Guidelines

• Forms must be notarized where indicated.
• Must include statutory language without substantial deviation.
• Certain forms (e.g., Affidavit of Nonpayment) must be recorded with the Chancery Clerk in the county where the property is located.

Best Practice for Lenders

• Confirm that any lien-related forms executed by project participants follow the statutory model exactly.
• Track deadlines associated with each document (e.g., 60 days for Affidavit of Nonpayment, 90-day window after Notice of Contest).
• Work closely with title companies to monitor for recorded liens or affidavits filed against the property.

Lien Priority

Mississippi’s lien priority rules are governed by Miss. Code Ann. § 85-7-405 and related provisions. These statutes establish how mechanics liens interact with other recorded interests, such as mortgages and deeds of trust.

General Rule

mechanics liens do not automatically have priority over previously recorded mortgages or deeds of trust. Instead, Mississippi follows a first-to-record, first-in-priority approach unless specific exceptions apply.

Key Statutory Citations

• § 85-7-405: States that no lien shall take priority over a previously recorded mortgage unless expressly provided by law.
• § 85-7-403(1): Lien rights attach for those performing labor or supplying materials for construction, improvement, or repair.
• § 85-7-403(2): Requires pre-lien notice for claimants not in direct privity with the owner.
• § 85-7-409(3): Mandates that the pre-lien notice be served at least 10 days before filing the lien.
• § 85-7-429: Establishes that liens take effect upon filing with the chancery clerk and priority is based on the recording date.

Practical Implications

• A mortgage or deed of trust recorded before any work begins will generally have priority over a mechanics lien.
• A lien claimant must comply with pre-lien notice and recording timelines to preserve and perfect lien rights.
• Failure to serve notice or timely record the lien will typically result in loss of priority.

Best Practices for Lenders

• Document the date construction begins and record mortgages before any visible work starts.
• Obtain a pre-closing inspection or photographic evidence that no construction has begun at the time of loan closing.
• Require pre-lien notices from subcontractors and suppliers who are not in direct contract with the owner.
• Ensure ongoing title updates and monitor for any recorded liens or affidavits.

Note: Even if a lien claimant fails to gain priority over a previously recorded mortgage, their lien may still impair title and create foreclosure risks if not resolved or bonded off prior to project completion.

Title Practices

Mississippi follows widely accepted national title insurance standards and practices, including the use of American Land Title Association (ALTA) forms. Construction lenders working in Mississippi will commonly rely on title insurance providers to manage lien risk through title commitments, endorsements, and final policies.

ALTA Endorsements Commonly Used in Mississippi

ALTA 32 (Construction Loan)

• Benefit: Insures the lender against loss from liens arising during the course of construction.
• Implication if not used: The lender may be exposed to unfiled or undiscovered lien risks that arise as construction progresses.

ALTA 33 (Disbursement)

• Benefit: Provides assurance that each loan disbursement retains priority over potential intervening liens.
• Implication if not used: Priority may be lost if unauthorized or improperly timed disbursements are made, leaving the lender vulnerable to subordinate lien claims.

ALTA 9 (Restrictions, Encroachments, Minerals)

• Benefit: Protects against losses due to violations of restrictive covenants, encroachments, and certain mineral-related title issues.
• Implication if not used: The lender may face unforeseen title objections or challenges, particularly from boundary disputes or use restrictions.

Availability and application of endorsements may vary by title company and project scope. Lenders should confirm with the title underwriter what is available based on underwriting standards and the property type.

Title Company Participation (Lender Requested)

Conduct title searches and issue a title commitment identifying existing liens or encumbrances.
Issue date-down endorsements at each draw disbursement.
Assist in filing/recording documents affecting lien coverage.

Best Practices for Lenders

• Engage a reputable title company familiar with Mississippi construction practices.
• Request ALTA 32 and 33 endorsements for construction loans to ensure lien protection.
• Confirm that final title policy issuance is conditioned on receipt of final lien waivers, inspections, and absence of interim liens.
• Retain all endorsement documentation and title updates in the loan file.

Note: Because Mississippi lien law follows strict statutory procedures, construction lenders should not rely solely on lien waivers. Title insurance coverage should be treated as a critical backstop to enforce lien priority and manage disbursement risk.

Escrow Accounts

Mississippi law does not impose specific statutory requirements on lenders regarding the handling of construction loan escrow accounts or the payment of interest on escrowed funds. However, escrow practices may be governed by:

• Federal regulations (e.g., RESPA) for consumer loans
• Loan agreements and lender policy
• Local customs or title company practices

Best Practices for Lenders

• Clearly define escrow terms in the loan agreement, including whether funds will be escrowed for taxes, insurance, or retainage.
• Work with the title company to verify that disbursement conditions are met before releasing escrowed funds.
• For loans requiring retainage, consider establishing a dedicated escrow account to fund final payments after lien waiver and inspection requirements are satisfied.
• Maintain a paper trail for escrow deposits, disbursements, and conditions tied to fund release.

Note: Even in the absence of state mandates, consistent escrow handling practices help manage disbursement risk and promote lender protection in the event of borrower default or lien disputes.