A mechanic’s lien is an encumbrance on private property to secure payment for a contractor (or subcontractor) or material supplier for labor or materials provided to improve that property. (Not familiar with mechanic’s liens? Review my earlier post on the basics of Massachusetts’ mechanic’s lien law). It is designed to assist a contractor or supplier with getting paid for work they perform on a project. Notice that a mechanic’s lien has been filed is usually not a welcome notice to the owner of the property. That is especially true if the owner of the property is a landlord and not undertaking the project directly. However, property owners can ultimately be responsible for nonpayment to a contractor or supplier if a mechanic’s lien is properly asserted, so owners need to be familiar with their obligations under the lien law. Here is what an owner needs to know about their liability for Massachusetts mechanic’s liens.
Landlords may be liable for tenant improvements and build-outs. Massachusetts General Laws chapter 254, §2 allows a lien to be established by a contractor or supplier that has a written contract with the owner to provide labor or materials “or with any person acting for, on behalf of, or with the consent of such owner”. This had traditionally been interpreted to mean that owner/landlords could not be subject to mechanic’s lien for work completed by the tenant. However, in 2011, the Massachusetts Supreme Judicial Court in Trace Construction, Inc. v. Dana Barros Sports Complex, LLC held that an owner/landlord that knew about tenant improvements and contemplated having work completed by the tenant in its lease would be subject to a lien because such work was under taken with the consent of the owner/landlord. Since an owner/landlord may be subject to the same liability as an owner with its own construction project, an owner/landlord needs to be aware of mechanic’s lien liability when any construction occurs on its property.
Keep track of who is working on your project and whether trades are getting paid. Ask the general contractor who the lower-tier contractors and suppliers are. Owners may receive a Notice of Identification from a sub-subcontractor or lower tier supplier by mail within the first thirty (30) days of starting work on the project, but these are not consistently used in the industry. Once you know who is on the project, ask your general contractor or the subcontractors and suppliers directly if they are getting paid. It benefits the owner when all trades are being timely paid on the project. After all, the mechanic’s liens that are the most damaging to an owner are ones for labor and materials that remain unpaid.
Keep track of the progress and timeline of the entire project. Mechanic’s liens can be initiated by recording a Notice of Contract only up to ninety (90) days after the last date work was performed by the general contractor or any subcontractor or supplier under the general contractor. You will then be mailed a copy of the recorded Notice of Contract to put you on notice of the mechanic’s lien. The contractor or supplier must also record a Statement of Account and bring a complaint to enforce the lien within additional deadlines. Verify that the contractor or supplier has met the statutory deadlines. Consider recording a Notice of Substantial Completion once the project is sufficiently complete so that it can be occupied or utilized for its intended use. This filing will shorten the time for a contractor or supplier to assert a mechanic’s lien to sixty (60) days after this notice is recorded. The law requires strict compliance with all of the statutory mechanic’s lien deadlines. If a contractor or supplier has missed any deadline, its lien will be invalid and you can avoid the time and expense of dealing with it.
The bottom line. The ultimate result of a mechanic’s lien asserted by a contractor or supplier is an order from the Court for sale of the property to satisfy the unpaid lien. While very few liens go to this extreme, that will be the outcome if a mechanic’s lien is ignored by an owner. Taking steps early to ensure contractors and suppliers are being timely paid is a small investment to avoid a lien against your property that may impact the sale or financing of your property.
The mechanic’s lien process is complex and defending lien claims can be difficult without a solid understanding of the law. For questions or assistance with Massachusetts mechanic’s liens, contact Jessica Murphy at (508) 791-8500 or another member of Mirick O’Connell’s experienced Construction Group.