MISSISSIPPI has always been one of the worst states in the U.S. for subcontractors to do business in. A recent ruling on October 10, 2013 by the United States Court of Appeals for the Fifth Circuit only made things go from worse to horrible. Previously, Subcontractors on construction improvements could not file a a contruction lien IF they were not in direct contract with the Owner. A partial work around that was highly employed to help force payment was use of the Stop Notice. By instructing the Owner to withhold funds from the General Contractor until the GC paid an invoice(s) in full, Subcontractors at least had a reasonable chance for a solvent General Contractor to realize slow or non payment would not be tolerated by a Subcontractor.
The court ruling (Noatex Corporation v. King Construction of Houston, LLC, 2013 U.S. App. LEXIS 20656 (5th Circuit, October 10, 2013) in effect made use of a Stop Notice “illegal.” The argument was successfully made by the General Contractor that a Subscontractor sending an Owner a Stop Notice is “an unconstitutional violation of procedural due process.” Never mind the fact then that a GC then has all the rights to lien, but the poor supplier or tradesman providing labor or materials thus has NO rights.
What to do in the short term? Easy to say, hard to implement, but aggresive pre-payment terms in combination with attempting to get a contract with an Owner are the only options unless you simply walk away from business. Hopefully lobbyist for MISSISSSIPPI subcontractors will get the upper hand and get the law corrected with not only a Stop Notice being an option again but also the new creation of lien rights for MISSISSIPPI subcontractors.