MECHANIC'S LIENS – An Invaluable Tool, but One that Requires the Expertise of an Attorney!

Massachusetts law creates a mechanism known as a mechanic's lien which provides security to contractors, subcontractors, laborers, design professionals and suppliers who perform labor or supplies material for the improvement of real estate by agreement or with the express or implied consent of the owner, and to whom a debt is due. While certain individuals or business owners attempt to tackle the often complex and difficult task of correctly creating and perfecting a mechanic's lien without the benefit and assistance of legal counsel, intending only to refer the matter to counsel if and when necessary for enforcement purposes, this "go it alone" approach can produce catastrophic results. The principal reason for the danger in attempting to play lawyer is that a mechanic's lien is not a common-law right but a creature of statute, and the Massachusetts Supreme Judicial Court has consistently required exact compliance with the statute in order to create, perfect, and enforce such mechanic's lien. Indeed, in almost all cases, a mistake made anywhere along the way is fatal, and results in dissolution of the lien, or in failure of the lien to attach.

The Law…

The statutory framework, set forth in G.L. c. 254, §§ 1 et seq., specifies the procedures for establishing and enforcing a mechanic's lien in detail. The statute requires strict observance of notice and deadline requirements calculated to ensure that all affected parties have an opportunity to determine the extent of claims and safeguard competing interests as allowed by law. The mechanic's lien statute is designed to ensure that a person searching the land records in a registry of deeds can determine with certainty whether or not title to a particular parcel of land is encumbered by a mechanic's lien.

In order to create a mechanic's lien, Massachusetts law requires the contractor, subcontractor, laborer, design professional or supplier to whom the debt is due to record a "notice of contract" in the registry of deeds for the county in which the property is located. The statute sets a deadline for the recording of such a notice of contract, and calculates that deadline according to the way that the contract is either terminated or completed. If the parties to the contract have filed a "notice of substantial completion" signifying the parties' agreement that the work under the written contract is sufficiently complete so that it can be occupied or utilized for its intended use, the contractor must file the notice of contract no later than sixty days after the filing of the notice of substantial completion. If the contract has been terminated and the owner has filed a notice of termination, the contractor must file the notice of contract no later than ninety days after the filing of the notice of termination. Or, in the absence of any such notice of substantial completion or notice of termination, the deadline for filing a notice of contract is ninety days after the contractor 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, or performed professional services. A notice of contract may be recorded at any time after execution of the written contract, as long as it is recorded before the applicable deadline. The recording of the notice of contract establishes the priority of the mechanic's lien. As a general matter, the lien takes priority over all other later-recorded encumbrances on the property. Thus, once filed, the notice of contract sets the date for the lien's priority.

Additional Steps to Perfect the Lien are Necessary.

The enforcement of the lien, however, requires further steps which must also be performed within time frames established by the statute. The contractor must record a "statement of account", setting forth the amount due or to become due. That statement of account must be filed within ninety days of the filing of a notice of substantial completion; within 120 days of the filing of a notice of termination; or within 120 days after the contractor last performed or furnished labor, materials, equipment, appliances, or tools for the project, whichever is earliest. After filing the statement of account, the part asserting the lien has a brief period of time in which to enforce the lien. A civil action must be filed within ninety days of the recording of the statement of account, and, within thirty days of filing that suit, an attested copy of the complaint must be recorded in the registry of deeds.

Differing Rights Between Differing Classes of Lienholders

Not all classes of potential mechanic's lienholders have identical rights under Massachusetts law. For example, a so-called "first tier" subcontractor's lien is limited in that it shall not exceed the amount due or to become under the original contract as of the date notice of the filing of the subcontract is given by the subcontractor to the owner. Moreover, a so-called "second tier" subcontractor, most often a material supplier, who has no direct contractual relationship with the original contractor, faces an even greater potential limitation. The amount of a second tier subcontractor's 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. This provision encourages second tier subcontractors to provide notice of their work to general contractors, and gives general contractors an incentive to make certain that lower tier subcontractors are being paid by first tier subcontractors. Even with a written notice of identification, however, a second-tier subcontractor is in no better position than a first-tier subcontractor with respect to the limitation on payment established by the timing of the recording of the notice of contract. It should further be noted that Massachusetts law has held that both first tier subcontractors and second-tier subcontractors are limited to mechanics' liens only against a non-surrendered leasehold interest in situations where the prime contract is between a lessee, acting with the "consent" of the owner of the property, and the general contractor.

Make the Right Decision…Hire an Attorney!

All told, the moral of the story is that the most sensible and sound business decision is to have a knowledgeable and experienced an attorney actively involved in the process from the creation of the mechanic's lien, including doing the necessary title exam to properly identify the property and determine other priority lienholders and interests, through enforcement. While there of course is a cost in doing so, this cost is worth its weight in gold. Having an attorney overseeing the entire process will avoid the possibility of learning down the road that the mechanic's lien once thought to be valid is now worthless.

David M. Baker, Esq.- your Massachusetts and Rhode Island Commercial Debt Collection Law Attorney!

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