Lien Rights On Tribal Projects - Bonding Solutions

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Lien Rights On Tribal Projects

Lien Rights On Tribal Projects

Perfromance & Payment Bonds

In America, there are 574 federally recognized Indian Sovereign Nations. For the past 50 years, construction and development have boomed on tribal lands. Native American communities develop various projects, including municipal buildings, housing, roads, utilities, commercial space, and casinos. It is a multi-billion dollar industry, and this demand for construction has required non-Native suppliers, contractors, and developers engage their services on Tribal projects.

The question for non-Native contractors, developers, and suppliers is, will we get paid? Non-payment or disputes regarding payment are common in any contracting-related project, and risks in working with any project owner should be considered before engaging.

The easy answer to this question regarding lien rights is:  No, they do not exist on Tribal projects.

The more complicated answer is that Native American Tribes are federally granted sovereign immunity from both states and federal laws. Disputes are not handled in U.S. or state courts. So, a person or business can’t litigate against a Tribe. The Tribe can decide to waive sovereign immunity, but this is not common and generally not favored by Tribes.

The state governs mechanics liens by their laws. Because state laws are not applicable on Native American reservations, lien rights are not valid either. Neither are federal laws.

Surety Bonds to the Rescue!

Most Tribes, contractors, and developers favor using performance and payment bonds to assure project completion and payment of subs and suppliers.

Generally, a surety company issuing the bond will want a waiver of sovereign immunity. Tribal communities will not agree to a full waiver. Tribes have been known to consider partial waivers on larger projects, but this request is generally not favored by the Tribe. A more common solution is a contractual obligation to agree to “third party arbitration” in the applicable state or federal jurisdiction. This means that the two parties will agree to settle disputes in arbitration while conforming to applicable state and federal laws. This provides the surety company an assurance that payment and other disputes will be handled appropriately and allows them to support bonds on Tribal land.

In conclusion, mechanics liens do not apply on Tribal land. That being said, thousands of contractors work with Tribal owners. Considering contractual obligations for all projects should be standard practice for any company or individual.

*This article is not meant to provide legal advice, and any questions regarding a legal or contractual matter should be referred to an attorney.

published on Wednesday, May 12th, 2021

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