Mechanic Lien revised - Literature Essay Example

FACTS

Mark, herein referred to as the ‘homeowner,’ recently inherited a house from his uncle located in Bristol County, Massachusetts, which had been in his family for three generations - Mechanic Lien revised introduction. At the time he inherited the house, it was condemned by the Town’s Board of Health. Mark decided to revitalize his family’s home and met with and received a plan from his architect. The homeowner hired a contractor, herein referred to as ‘contractor’ and entered into a contract concerning the renovation of the property, the total price of which was $450,000. The work included upgrading the plumbing, the electrical system, a kitchen and bathroom upgrade, the installation of hardwood floors and the installation of a gas fireplace. The kitchen and bathroom upgrade included the installation of tile, fixtures and granite countertops and marble floors. The homeowner agreed to be responsible for the cost of all fixtures, tile and the granite and marble.

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The contractor was responsible for all matters associated with the plumbing, electrical system, the flooring and the gas fireplace and was to hire and supervise the work of all tradesmen. The contract included a 15% markup for the contractor as compensation for his services. The fair market value of the house after completion of the project would be $800,000. The homeowner had a mortgage of $200,000. Although the contractor completed much of the project and the work was adequate, it appears he did not pay the plumber or electrician as promised.

The plumber and electrician, herein referred as ‘subcontractors,’ are now calling the homeowner and have hired an attorney, threatening to put a lien on the homeowner’s house. The homeowner has paid $445,000 on the contract. There have been no filings with the registry of deeds.

ISSUES

 

Under Section 1 Chapter 254 of the General Laws of Massachusetts, the person who performed personal labor for the repair of a building, structure or improvement by virtue of an agreement with the owner or at least with the consent of the owner, shall have a lien on such property.[1] Assuming that there is a valid contract between homeowner and contractor and contractor and subcontractors, that there was a notice of termination and that the occupancy permit was issued on December 5, 2007 and Mark moved in on December 12, 2007, are the subcontractors entitled to said lien on the homeowner’s house when the contractor has not paid them? Have the contractor/subcontractors perfected the lien?

RULE OF LAW

 

Under the General Laws of Massachusetts, “A person to whom a debt is due for personal labor performed in the erection, alteration, repair or removal of a building or structure upon land or improvement or alteration to real property, by virtue of an agreement with, or by consent of, the owner of such building or structure… shall have a lien upon such building or structure and upon such interest in such real property, land, building, structure, or improvement owned by the party authorizing or consenting to said work, for not more than thirty days’ work actually performed for the ninety days next prior to his filing a statement as provided in section eight.”[2]

A subcontractor can file a claim to secure the payment of the labor provided under Section 2 of the same chapter where it provides that there must be a notice of said contract filed or recorded in the registry of deeds for the county or district where such land lies.[3] The form of the said notice filed or recorded in the registry of deeds in the county or registry district where the said property lies, shall substantially follow the form provided in Section 2.[4]

A subcontractor can also file a claim for lien under Section 4 of the same chapter if the one who furnishes material or labor, or both, has a written contract with a contractor which notice may be filed or recorded in the registry of deeds for the county or district where such land lies in the form provided under Section 4.[5]

The time when to file the said notice of contract is provided in Section 2 may be “at any time after execution of the written contract whether or not the date for performance stated in such written contract has passed and whether or not the work under such written contract has been performed, but not later than the earliest of: (i) sixty days after filing or recording of the notice of substantial completion under section two A; or (ii) ninety days after filing or recording of the notice of termination under section two B; or (iii) ninety days after such person or any person by, through or under him last performed or furnished labor or materials or both labor and materials.”[6] ‘Substantial completion’ mentioned above, has been defined as “that work under the written contract which is sufficiently complete so that it can be occupied or utilized for its intended use,” while ‘written contract’ has been defined as “any written contract enforceable under the laws of the commonwealth.”[7]

The time for filing or recording of the notice of contract, under Section 4 on the other hand may be “at any time after execution of the written contract whether or not the date for performance stated in such written contract has passed and whether or not the work under such contract has been performed, but not later than the earliest of: (i) 60 days after filing or recording the notice of substantial completion under section two A; or (ii) 90 days after filing or recording of the notice of termination under section two B; or (iii) 90 days after the last day a person entitled to enforce a lien under section two or anyone claiming by, through or under him performed or furnished labor or materials or both labor and materials to the project or furnished rental equipment, appliances or tools.”[8] Furthermore, upon compliance with the  filing or recording of the said notice, and giving actual notice to the owner of such filing, the subcontractor shall have a lien upon such real property, land, building, structure or improvement owned by the party who entered into the original contract as appears of record at the time of such filing, to secure the payment of all labor… which he has furnished for the building or structure or other improvement, regardless of the amount stated in the notice of contract.”[9] The lien that said subcontractor can claim, “shall not exceed the amount due or to become due under the original contract as of the date notice of the filing of the subcontract is given by the subcontractor to the owner.”[10] However, “if the subcontractor has no direct contractual relationship with the original contractor, except for liens for labor by persons defined in section one of this chapter, the amount of such lien shall not exceed the amount due or to become due under the subcontract between the original contractor and the subcontractor whose work includes the work of the person claiming the lien as of the date such person files his notice of contract, unless the person claiming such lien has, within thirty days of commencement of his performance, given written notice of identification by certified mail return receipt requested to the original contractor in substantially the form provided.”[11]

Upon or after substantial completion of the contract under Section 2, the law provides that, the owner and contractor shall execute and file or record in the appropriate registry of deeds a notice of substantial completion in form prescribed under Section 2A, and stating that the contractor has served a written notice of the recording or filing of this notice of substantial completion upon every person who has entered into a written contract directly with the contractor or who has given written notice of identification to the contractor prior to the date this notice is filed or recorded, which shall be  mailed by certified mail return.[12] However, if the said notice of the filing or recording of the notice of substantial completion to those persons was not complied with, “this then shall not prejudice the rights of third parties who rely upon said notice of substantial completion in good faith and without actual knowledge of such failure of notice.”[13]

Aside from notice of contract, there must also be a notice of account required under Section 8, which provides that, “liens under Sections 2 and 4 shall be dissolved, unless the contractor, subcontractor, or some person claiming by, through or under them, shall, not later than the earliest of: (i) 90 days after the filing or recording of the notice of substantial completion under section two A; (ii) 120 days after the filing or recording of the notice of termination under section two B; or (iii) 120 days after the last day a person, entitled to enforce a lien under section two or anyone claiming by, through or under him, performed or furnished labor or material or both labor and materials… file or record in the registry of deeds in the county or district where the land lies a statement, giving a just and true account of the amount due or to become due him, with all just credits, a brief description of the property, and the names of the owners set forth in the notice of contract.”[14] Section 8 also stresses the importance of filing or recording of liens under sections two and four, wherein it provides that “a lien mentioned under Section 1 may also be dissolved, unless a like statement, giving the names of the owner of record at the time the work was performed or at the time of filing the statement, is filed or recorded in the appropriate registry of deeds within the ninety days provided in said section.”[15] The filing or recording of the said statement may be made prior to the filing or recording of the notices under section two A or two B.”[16] Furthermore, “The lien shall be dissolved unless a civil action to enforce it is commenced within ninety days after the filing of the statement required by section eight.”[17]

The lien shall be enforced by “a civil action brought in the superior court for the county where such land lies or in the district court in the judicial district where such land lies.”[18] Aside from this, the law requires that “an attested copy of the complaint, which shall contain a brief description of the property sufficient to identify it, and a statement of the amount due, shall be filed in the registry of deeds and recorded as provided in section nine within thirty days of the commencement of the action, or such lien shall be dissolved.”[19]

As regards the effect of the existence of mortgages to a lien, the priority given to mortgages is provided in Section 7, which provides that, “No lien shall avail against a mortgage duly registered or recorded unless the work or labor performed …was actually begun prior to the recording of the mortgage.”[20]

The mechanic’s lien statute was amended and as reflected in the provisions, to extend the lien in securing payment for work and materials to those supplied before and even after the filing of a notice of contract.[21] In Hammill-McCormick Assocs., Inc. v. New England Tel. & Tel. Co., 399 Mass. 541, 545, 505 N.E.2d 883 (1987),  the Court stated that “a notice of contract which stated the completion date set forth in the contract itself, was sufficient to establish a lien.”[22] But the Court stressed that the lien, being a creature of a statute “can only be enforced by strict compliance with the statute.”[23] Furthermore, “the mechanic’s lien statute is strictly construed against the party claiming the lien.”[24] Hence, as stated in the case of National Lumber Company v. United Casualty and Surety Insurance Company, Inc., 440 Mass. 723, 802 N.E.2d 82 (2004), “Statutes governing the creation, perfection, and dissolution of a mechanic’s lien are strictly construed against the party claiming the lien.”[25]

The purpose of the mechanic’s lien is to provide not only security to contractors, subcontractors, laborers, and suppliers for the value of their services and goods provided to improve the owner’s real estate, but also to protect the owner and others with an interest in the property through statutes that provide for filing and notice requirements.[26] The Court also advised that “In order to protect a lien, it is advisable to record in a registry of deeds evidence of the commencement of an action.”[27]

In cases where there is no completion date in the subcontract, the Court held that, “the subcontractor may specify estimated completion date in notice of contract that it files to establish mechanic’s lien, regardless of whether general contractor agrees to that date.”[28]

ANALYSIS

 

As provided for under the law, the general steps in filing a mechanic’s lien include: the filing of the notice of contract under Section 2 of Chapter 254 of the General Laws of Massachusetts; the filing of the notice of account under Sections 2 and 4 of the same Chapter; and finally the filing of a complaint or civil action under Section 5 of the same Chapter.[29] The notice of contract must be filed with the Registry of Deeds where the property is located, as provided under Section 2 of Chapter 254 of the said law.[30] The next step which involves the filing of the “statement of account” shall state the amount of lien or money due required under Section 8 of the same Chapter.[31] This must also be filed with the registry of deeds where the property lies.[32] The last step involved is the filing of a complaint with “either the district court or superior court to foreclose the lien,” provided for under Section 5 of the law.[33] As explained by Sauer, if these requirements along with the time within which they have to be filed, are not complied with, then this may cause “the lien to be dissolved by operation of law,” which is provided for under Section 8.[34]

Aside from the filing of the above-mentioned notice of contract with the proper Registry of Deeds, the claimant must also comply with the deadline for its filing under Sections 2 and 4 which shall not be later than the earliest of: (i) 60 days after filing or recording of the notice of substantial completion under section two A; or (ii) 90 days after filing or recording of the notice of termination under section two B; or (iii) 90 days after such person or any person by, through or under him last performed or furnished labor or materials or both labor and materials.[35] The statement of account on the other hand, must be filed within the time prescribed under Section 8, which shall, not be later than the earliest of: (i) 90 days after the filing or recording of the notice of substantial completion under section two A; (ii) 120 days after the filing or recording of the notice of termination under section two B; or (iii) 120 after the last day a person.[36] Finally, a complaint must be filed with either the superior or district court in order to enforce the lien, and an attested-to copy of the complaint has to be filed at the Registry of Deeds within 30 days from the commencement of the civil action.[37]

In the given problem, there was no notice of contract filed by the subcontractors with the Registry of Deeds nor was there a filing of the statement of account within the period required for under the law.[38] As stated in the Hammill-McCormick Assocs., Inc. case, the mechanic’s lien being a mere creation of law, the procedure must then be strictly complied with by the claimants and hence they must prove their claim. If said claimants are unable to follow that which is prescribed under the law, then their lien may be dissolved as provided under Section 8 of the said law. Furthermore, as provided in a recent case, “Allowing a subcontractor to recover damages in a quasi-contract action against a property owner with whom that subcontractor was not in contractual privity would in essence eliminate the reason the long-lived mechanic’s lien statute exists, and would render its strictly-construed provisions superfluous in their entirety.”[39] The requirements are essentially to notify the owner of what the subcontractors has furnished including the amount that the homeowner should pay. Without the required recording or filing with the Registry of Deeds, the homeowner is uninformed and hence, the claim is dissolved under Section 8 of the said law. Furthermore, in the given problem, although no filing of the notice of substantial completion was done by owner and the general contractor, this however is not a prerequisite for the filing or recording of a notice of contract or a statement of account by the subcontractor.[40] Also, even if there was no notice of contract filed by the owner to protect himself, this is also not a prerequisite for the filing of the notice of contract by the subcontractor provided under Sections 2 and 4 of the law. In addition, the fact that there was already a substantial payment made, this does not mean that there is already substantial completion as defined under the law which provides “that work under the written contract which is sufficiently complete so that it can be occupied or utilized for its intended use.”[41] Finally, the claimants must also prove that the mortgage was not recorded or registered prior to the said liens, as liens also do not take priority over these existing mortgages and hence, subcontractors would not be able to claim under the law.[42]

CONCLUSION

 

The subcontractors not having complied with the statutory requirements for the perfection of their lien, they cannot claim the mechanic’s lien on the homeowner’s house.

References

Blount Brothers Corp. v. Lafayette Place Associates, 399 Mass. 632, 506 N.E.2d 499 (1987).

 

C. Smith & Son, Inc. v. Brooks/Maxi Drug, Inc., 22 Mass.L.Rptr. 140, Not Reported in N.E.2d, 2007 WL 799365 Mass.Super.(2007).

East Coast Steel Erectors, Inc. v. Phillip K. Ciolfi, 417 Mass. 602, 632 N.E.2d 397 (1994).

 

Hammill-McCormick Assocs., Inc. v. New England Tel. & Tel. Co., 399 Mass. 541, 545, 505 N.E.2d 883 (1987).

Golden v. General Builders Supply LLC, 441 Mass. 652, 807 N.E.2d 822 (2004).

 

Massachusetts General Laws, M.G.L. ch.254 §§1, 2, 2A, 4, 5, 7, 8, 11, 28

 

National Lumber Co. v. LeFrancois Construction Corp., 430 Mass. 663, 723 N.E.2d 10 (2000).

National Lumber Company v. United Casualty and Surety Insurance Company, Inc., 440 Mass. 723, 802 N.E.2d 82 (2004).

NG Brothers Construction, Inc. v. Cranney, 436 Mass. 638, 766 N.E.2d 864 (2002).

 

Sauer, J. (2003), Massachusetts Mechanic’s Lien Law, Business Credit, Massachusetts, available at http://www.allbusiness.com/legal/laws-government-regulations-business/524722-1.html.

 

[1] MASS. GEN. LAWS. ch. 254, §1 (1996).
[2] MASS. GEN. LAWS. ch. 254, §1 (1996).
[3] MASS. GEN. LAWS. ch. 254, §2 (1996).
[4] MASS. GEN. LAWS. ch. 254, §2 (1996).
[5] MASS. GEN. LAWS. ch. 254, §4 (1996).
[6] MASS. GEN. LAWS. ch. 254, §2 (1996).
[7] MASS. GEN. LAWS. ch. 254, §2A (1996).
[8] MASS. GEN. LAWS. ch. 254, §4 (1996).
[9] MASS. GEN. LAWS. ch. 254, §4 (1996).
[10] MASS. GEN. LAWS. ch. 254, §4 (1996).
[11] MASS. GEN. LAWS. ch. 254, §4 (1996).
[12] MASS. GEN. LAWS. ch. 254, §2A (1996).
[13] MASS. GEN. LAWS. ch. 254, §2A (1996).
[14] MASS. GEN. LAWS. ch. 254, §8 (1996).
[15] MASS. GEN. LAWS. ch. 254, §8 (1996).
[16] MASS. GEN. LAWS. ch. 254, §8 (1996).
[17] MASS. GEN. LAWS. ch. 254, §11 (1996).
[18] MASS. GEN. LAWS. ch. 254, §5 (1996).
[19] MASS. GEN. LAWS. ch. 254, §5 (1996).
[20] MASS. GEN. LAWS. ch. 254, §7 (1996).
[21] Blount Brothers Corp. v. Lafayette Place Associates, 399 Mass. 632, 506 N.E.2d 499, 1987.
[22] Hammill-McCormick Assocs., Inc. v. New England Tel. & Tel. Co., 399 Mass. 541, 545, 505 N.E.2d 883 (1987).
[23] Hammill-McCormick Assocs., Inc. v. New England Tel. & Tel. Co., 399 Mass. 541, 545, 505 N.E.2d 883 (1987).
[24] Golden v. General Builders Supply LLC, 441 Mass. 652, 807 N.E.2d 822 (2004).
[25] National Lumber Company v. United Casualty and Surety Insurance Company, Inc., 440 Mass. 723, 802 N.E.2d 82 (2004).
[26] National Lumber Company v. United Casualty and Surety Insurance Company, Inc., 440 Mass. 723, 802 N.E.2d 82, 2004).
[27] National Lumber Co. v. LeFrancois Construction Corp., 430 Mass. 663, 723 N.E.2d 10 (2000).
[28] East Coast Steel Erectors, Inc. V. Phillip K. Ciolfi, 417 Mass. 602, 632 N.E.2d 397 (1994).
[29] Jonathan Sauer, Massachusetts Mechanic’s Lien Law, Business Credit, Massachusetts (2003), available at http://www.allbusiness.com/legal/laws-government-regulations-business/524722-1.html.
[30] Id. at 2.
[31] Id. at 2.
[32] MASS. GEN. LAWS. ch. 254, §8 (1996).
[33] See note 29, supra.
[34] See note 29, supra.
[35] MASS. GEN. LAWS. ch. 254, §§ 2 and 4 (1996).
[36] MASS. GEN. LAWS. ch. 254, § 8 (1996).
[37] MASS. GEN. LAWS. ch. 254, § 5 (1996).
[38] MASS. GEN. LAWS. ch. 254, §§ 2, 4 and 8 (1996).
[39] C. Smith & Son, Inc. v. Brooks/Maxi Drug, Inc., 22 Mass.L.Rptr. 140, Not Reported in N.E.2d, 2007 WL 799365 Mass.Super. (2007).
[40] NG Brothers Construction, Inc. v. Cranney, 436 Mass. 638, 766 N.E.2d 864 (2002).
[41] MASS. GEN. LAWS. ch. 254, § 2A (1996).
[42] MASS. GEN. LAWS. ch. 254, §c11(1996).

 

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