May 24, 2023
Written By: Jason W. Alexander and Paxton L. Deuel from Sussman Shank LLP
If you are a contractor who performs work on tribal lands, you may wonder whether you can claim a construction lien if you are not paid. A construction lien secures your right to payment by the lien “attaching” to the property where you provided labor or materials and if you remain unpaid, you can foreclose the lien and force the sale of the property. However, claiming a construction lien on property within the jurisdiction of an Indian tribe is not as straightforward as claiming one on private property outside the jurisdiction of an Indian tribe. In fact, in most cases, it’s not possible at all. This article discusses the obstacles to claiming a construction lien against tribal lands and proposes alternative ways for contractors and material suppliers to protect themselves from non-payment.
A construction lien is generally defined as a secured claim against real property, including any structures on the property. The right to claim such a lien arises when a contractor or supplier is not paid for services or materials provided to the project. When done properly, the construction lien can be a powerful tool to help obtain payment. Many contractors and suppliers use the construction lien as their go-to remedy to assist in securing payment. But, if they were to do so for a project on tribal lands, the outcome will most likely not be what was expected.
Construction liens are creatures of state statutes and are only enforceable where the state court has jurisdiction. Indian tribes have long been recognized as sovereign entities (with limited exceptions) and remain a ‘separate people’ with the power of regulating their internal and social relations and making their own substantive law in internal matters, and enforcing that law in their own forums. This concept is generally known as ‘sovereign immunity.’ As such, state courts generally don’t have jurisdiction over tribal lands. Thus, even if you have a valid contract with a tribal entity or a tribal member, you generally cannot enforce it through a state or federal court action.
So, that raises the question: what are some options to best protect yourself from non-payment when working for a tribal member or a project located on tribal land? Here are some options:
• Advance Payment. The best and most direct option is to obtain full payment in advance. If such is done, the risk of non-payment doesn’t exist.
• Waiver. If advance payment is not on the table, one option is to include a ‘waiver of sovereign immunity’ provision in your contract. If done properly, this will allow you to sue the tribal entity or member in state or federal court. If this option is chosen, you should consult with an attorney to ensure the provision addresses the issues that need to be addressed. This is a complicated area and care should be taken to ensure it is done right. At a minimum, the waiver should be in writing, signed by the appropriate tribal authority, state that the tribe and member are waiving sovereign immunity and consenting to the jurisdiction of the applicable court, spell out all remedies that may be sought and enforced, and state that the waiver is binding and can’t be revoked.
• Payment Bond. Another option to protect yourself from non-payment is to require a payment bond. A payment bond is a type of surety bond that guarantees that contractors, subcontractors, and suppliers involved in a construction project will be paid. In effect, when a payment bond is issued, it is in essence, a promise by the surety company to the protected parties that satisfy the conditions of the bond that it will pay for the construction should the owner or other responsible party fail to do so. And, since the surety is not a member of the tribe, if a protected party needs to enforce the payment bond, it can do so in state or federal court without worrying about sovereign immunity concerns.
• Tribe-Specific Option. If none of the above options are available, another option is exploring what remedies exist within the particular tribe for whom you are working to protect against non-payment. Each tribe has its own laws, so it is important to locate a lawyer who is familiar with the procedures and laws of the tribe in question before you agree to do any work.
In addition to the above options, you should always verify the financial status and reputation of the tribal entity or member before you enter into the contract with the tribal entity or member. Do they have a history of non-payment? Do they have sufficient funds or credit to pay you?
In conclusion, unless you have verified otherwise, you should always assume that construction lien rights will not be available to you on any project involving Indian tribes or their members and that other arrangements should be made to protect your ability to be paid for your work.
This article has been prepared for general informational purposes only, is not intended as legal advice, and should not be relied upon as providing legal advice.
Jason Alexander – Partner
Jason helps companies with their legal needs and disputes. His primary areas of practice include outside corporate counsel advice, construction, real estate, and creditor/debtor rights (including judgment enforcement). In addition, Jason has significant experience in all facets of dispute resolution, including negotiation, mediation, arbitration, and trials.
Paxton L. Deuel – Associate Attorney
Paxton is an Associate Attorney at Sussman Shank LLP where he practices in the industries of agribusiness, construction, privately held and family-owned business, and real estate and land use. He graduated magna cum laude from Willamette University College of Law in January 2023.
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