Source: https://www.sauerconstructionlaw.com/construction-law-articles/massachusetts-mechanics-lien-law-as-of-2012/
Timestamp: 2020-01-25 17:30:25
Document Index: 558252310

Matched Legal Cases: ['§ 25', '§ 2', '§ 13', '§ 11', '§ 1', '§ 1', '§ 2', '§ 4', '§ 1', '§4']

On August 9, 1996 former Governor Weld signed into law Chapter 364 of the Acts of 1996, making major revisions to Chapter 254 of the General Laws, which is the mechanic’s lien statute. This legislation effected the most significant changes to the lien law accomplished since 1915 and took effect on February 7, 1997. These changes include, without limitation: a broadening of coverage (as to what kind of projects are covered); a broadening of who may file a lien; and, fairly extensive improvements as to the timing of the filing of the lien, including a substantial reduction in the importance of the concept of “completion dates”. Like so many other elements of ‘the law’, there is a certain degree of irony to the ‘amendments’ inasmuch as the ‘amendments’ exceed the length and breadth of the prior statute significantly, even while leaving several sections of the law unchanged.
As our last review of this statute - shortly after the amendments were enacted - is dated, let’s take a look at how this ‘new’ statute has worked out. Moreover, this article is broader in scope than the original article and indicates in what ways the recent amendments have been successful. Or, not.
A. The problem of the timing of the lien.
The key concept in prior lien law with regard to mechanic’s liens from subcontractors and general contractors was to tie the filing of the mechanic’s lien into the completion date contained within the contract. Generally speaking, all mechanics’ liens needed to be filed by the completion date in the contract. Once that completion date had been reached, lien rights themselves expired. Subcontractors without completion dates in their subcontracts could sometimes file liens beyond the time of the performance of their actual work provided the liens were filed prior to the general contractor’s completion date and that the owner did not contest the ‘estimated completion date’ under the procedures outlined by the statute: a complicated and cumbersome process.
Of course, the major difficulty with this timing mechanism was that by the time the subcontractor, in particular, determined that there was a serious payment problem, in all likelihood, the applicable completion date had already gone by. Or, if the completion date had not gone by, the subcontractor or general contractor would be afraid to file a lien, as this would have a negative impact on anticipated future payments and, just as importantly, on the relationship of the parties, which could affect issues pertaining to the completion of the project.
There was a certain case involving a general contractor which held that a general contractor could not file a mechanic’s lien after its completion date even where it still had substantial work to perform after the scheduled date of completion due to factors beyond its control and responsibility. This result obtained even where the general contractor’s contracting party agreed, at least implicitly, to an extension of the completion date. This was the case of Blount Bros. Corp. v. Lafayette Place Associates, 399 Mass. 632, 506 N.E.2d 499 (1987).
It was, in part, because of the holding in this case that the Associated General Contractors, along with a number of other industry trade groups, worked to develop the revisions to the mechanics’ lien laws, which are our current law.
The changes made in 1996 were substantial. As of that time, the mechanics’ lien law required the taking of the first act in filing a lien - the filing of a notice of contract - by the completion date indicated in the contract. This caused a number of untimely liens to be filed, liens that might not have had to be filed, everything else being equal. The new law provides that completion dates in contracts, existing or estimated, no longer have any application to mechanics’ liens.
The new metric is the general contractor’s last performance of work at the job, either by itself or by any of its subcontractors. This certainly extends a general contractor’s time within which to file a lien andgreatly broadens a subcontractor’s time frames within which to file a lien, particularly for certain trades which tend to perform their work earlier in the job.
B. Limitations on first tier material suppliers and subcontractors’ liens.
There are two filters or limitations in the new law, however, which need to be considered along with just the timing of the filing. The first is that under section 4 of MGL C. 254, no subcontractor’s lien will ever be valid for more than the amount the owner owes the general contractor as of the date of the subcontractor’s filing a lien and into the future. Therefore, subcontractor liens very late in the job are certainly still technically available. However, they might not actually be worth very much, as each payment made to the general contractor by the owner during the course of the job by that measure decreases the maximum potential of all mechanics’ liens that might be filed. The following is the operative sentence from Section 4:
This is where mechanics’ lien law takes a different path from a payment bond claim.
Massachusetts’ “Little Miller Act”, MGL C. 149, s. 29, after all, is in place in part because of the fact that in Massachusetts, no public lands can be liened as a matter of law. On a typical payment bond claim with a one hundred percent penal sum payment bond - meaning, the payment bond is in the amount of the contract - there is neither any particular benefit nor any particular harm in being either the first claimant or the last one. Not so with mechanics’ liens! As the job goes on, the potential lien ‘pie’ becomes smaller and smaller with every owner payment made. And, as happens a great deal of the time on a troubled job, the deeper into the job the lien is filed, the more likely that there will be other liens filed on the project at about the same time, as well. So, one of the ‘laws’ that must be kept in mind when considering the timing of the filing of a lien is the law of diminishing returns, which is definitely associated with later liens.
C. Limitations on second tier material suppliers and subcontractors’ liens.
The second filter is with regard to second tier suppliers and subcontractors. They are also subject to the first filter (or limitation) referenced above for first tier subcontractors. However, if they fail to serve the general contractor at the appropriate time with the “Notice of Identification” discussed, infra, they are subject to a second filter or limitation. Here is the statutory language, again from Section 4:
“If the person claiming a lien under this section 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 following form. . .”
What this means is that while second tiers can file mechanics’ liens without giving the Notice of Identification, in addition to the first filter discussed above, their liens will never exceed the amount that is due their contracting party - the first tier subcontractor - at the time they file their lien.
Again, since so many mechanics’ liens are filed very late in the process, the possibility of a second tier mechanics’ lien being successful without having first complied with the Notice of Identification process are slight.
This article does not address the rights of individual laborers to file liens, provided for under Section 1 of the statute. Also, this statute has been amended to give some lien rights to design professionals, which will not be discussed here. Rather, this article is concerned with those who risk and place their efforts, work and fortunes on the line every day: materialmen, subcontractors (first and second tiers) and general contractors.
2. NEW CONCEPTS AND FORMS
Mechanics’ liens employ a variety of forms. Several examples of common forms are attached to the end of this article, consisting of a: (a) Notice of Identification; (b) Notice of Contract (Subcontractor); ( c ) Statement of Account (Subcontractor); (d) Dissolution of Lien (Subcontractor). Other forms are also included at my website: www.sauerconstructionlaw.com.
There are three new documents (and concepts) lienors need to be familiar with which were not a part of the pre-existing lien law.
“Notice of Substantial Completion”. As provided for under the new amendments, at such time as substantial completion of any contract subject to a lien is reached, the owner and general contractor “shall execute and file or record in the appropriate Registry of Deeds a notice of substantial completion”, “substantial completion” being defined as a time when the “work under the written contract is sufficiently complete so that it can be occupied or utilized for its intended use”. This reflects the current standards for the concept of substantial completion in the construction industry. By this writer’s own experience over the last sixteen years or so, this procedure seems rarely followed.
“Notice of Termination”. Upon the termination by the owner of the general contractor prior to the filing of the notice of substantial completion with regard to a contract subject to a potential mechanics’ lien, the owner “shall execute and file or record in the appropriate Registry of Deeds a notice of termination”. Again, this writer has yet to see one of these in practice.
“Notice of Identification”. Second tier subcontractors and suppliers - meaning those who contract with subcontractors rather than with general contractors - if they choose to do so, may serve upon the general contractor a Notice of Identification by certified mail within thirty days of commencement of its performance, essentially identifying the sub-subcontractor’s involvement with the project. While the statute does not specifically define what constitutes ‘commencement of performance’ good practice (and caution) suggests that this period may start as soon as one has a signed purchase order. This form should provide the dollar amount of the contract. It is not necessary, however, to state dollar amounts for contracts for the rental of equipment, appliances or tools. The amount stated in any Notice of Identification, however, shall not limit the amount of the lien. This notice is not actually a mechanics’ lien in that it is not filed at the Registry of Deeds, need not be served on the Owner and does not require a detailed legal description of the real estate. Also, the service of the Notice of Identification, as a matter of law, does not create a mechanics’ lien. If this form is not served, a second tier subcontractor and supplier can still file a mechanics’ lien but the amount of that lien is limited to whatever money is in its contracting party’s (the subcontractor’s) account as due or to become due from the general contractor at (and after) the time that such lien is filed. Put another way, a first tier subcontractor’s lien is limited to what the owner owes the general contractor as of and after the date the notice of contract is filed by the subcontractor. A second tier supplier or subcontractor which does not serve a Notice of Identification upon the general contractor in a timely way is subject to the second filter of being limited to whatever is remaining in its contracting party’s account - the first tier subcontractor - as of the date the second tier subcontractor or supplier files its notice of contract. Simply by serving the Notice of Identification at the appropriate time, the second tier supplier or subcontractor is able to achieve the same mechanics’ lien rights as a first tier subcontractor.
From a conceptual standpoint, this type of notice is similar in theory to the second tier notice requirements of the (federal) Miller Act and of the “little Miller Acts” (similar laws enacted in the various states) as to public payment bond claims. Because the bonded general contractor faces the possibility of having to pay twice, fundamental fairness suggests that it should be made aware of its subcontractors’ contractual arrangements for which the general contractor may later face some responsibility for and which the general contractor otherwise might be unaware of. Put another way, it is no defense to a general contractor under Massachusetts’ ‘little Miller Act’ (Chapter 149, s. 29 of the MGL) that it paid its subcontractors promptly and completely in payment bond situations. The general contractor, indeed, can have to pay - and may have to pay - twice. Although surety bonds are not insurance, in a kind of simplistic way, the general contractor’s payment bond is insurance that the various first and second tier subcontractors and material suppliers get paid.
I doubt that the framers of the 1996 lien law amendments actually intended to have the Notice of Identification operate as anything other than the giving of mere notice. The law of unintended results asserts itself once more! I have found that many general contractors will actually treat the Notice of Identification as a kind of ‘back door’ or informal lien. Meaning, that even without having to actually file a notice of contract, I have seen several situations where the general contractor made an effort to make sure that the second tier supplier/subcontractor which served the Notice of Identification got paid, if only to avoid the lien that was anticipated to follow. For, one reasons, if the second tier subcontractor/material supplier is savvy enough to understand the Notice of Identification requirements, presumptively, it would also understand what it would have to do to claim a mechanics’ lien. The proper service of a Notice of Identification, albeit not a lien, may be all the ‘lien’ that might be necessary in some situations.
Note that the statute only specifically requires the second tier subcontractor or supplier to serve this document upon the general contractor. Serving this upon the owner as well - although not required - may achieve even a higher degree of attention and concern.
Remember the concept behind how a reach and apply action works? An unpaid supplier or subcontractor from a prior job notifying - and suing - a current owner and the general contractor on a current job to fund the unpaid debt is not going to win friends and influence people! One can imagine the typical owner response to such an action to be: “Who the hell is this guy and why is he bothering me? Why is he liening my project? What’s the matter? Don’t you pay your bills?” The owner is likely to rather forcefully express its dissatisfaction with this state of affairs to the general contractor. As often as not, the general contractor with the ability to pay in a reach and apply situation will probably pay. ‘Shame’ and ‘humiliation’, while not comfortable concepts or even particularly important in business matters in twenty-first century America, can be useful in helping one get paid. In like manner, a Notice of Identification can have aspects of this productivity.
3. THE CULTURE OF MECHANICS’ LIENS IN MASSACHUSETTS
Traditionally, Massachusetts general contractors and owners have had real antipathy and anger towards the filing of mechanics’ liens. Filing a lien was seen as an inherently hostile act. My experience has been that in other states, this adversary culture is less present in lien situations. For example, my experience has been that in Connecticut mechanics’ liens have been more acceptable than in Massachusetts, better tolerated in the business culture. In fact, I have seen situations where subcontractors having both payment bond rights and mechanics’ lien rights would choose to file a mechanics’ lien over a payment bond claim. In my view with thirty-six years of experience, I wouldalways favor a payment bond claim over a mechanic’s lien for various reasons. First of all, everything else being equal, good payment bond claims usually get paid by bonding companies, sooner or later. As discussed below, mechanics’ liens ultimately will prove to be poor funding sources.
Some hoped that with the revisions in the lien law, a more tolerant climate to liens might develop. By my experience, this hasn’t happened. ‘May you live in interesting times’ is a traditional Chinese curse. Filing mechanics’ liens often makes one’s life a lot more interesting!
In lien situations, it is typical to have all kinds of threats made by the various parties at each other and at the lawyers. I had one subcontractor tell me that his general contractor actually put a gun to his head in attempts to force him to withdraw his lien. He didn’t take off the lien or get shot. Instead, he recovered the majority of his money through his lien. Those who file mechanics’ liens should have a lot of fortitude in their tanks before they plunk down the filing fee for a notice of contract. Not having high blood pressure is also a plus!
4. WHY MECHANICS’ LIENS WORK
The purpose of a mechanic’s lien is to attempt to get a piece of the owner’s equity interest in a piece of real estate to fund a mechanics’ lien judgment. Like any other form of security interest, the filing of a mechanics’ lien is an attempt to secure the payment of an anticipated judgment against one’s debtors.
Like so many other things in life, this is a ‘good news, bad news’ situation. The bad news is that legal cases which go all of the way to judgment are frequently unsuccessful in terms of being able to effectively levy against an owner’s equity interest in the property. The good news is that mechanics’ liens frequently work for several reasons not even mentioned in the statute! But, first, the bad news.
A. Liening a home.
There are several difficulties with home liens. First, given our ‘interesting’ economic times, most homes in Massachusetts have lost significant value in the last four to five years.
Just as contractors can get financially ‘upside down’ on some of their jobs, many homeowners don’t have ostensible equity in their homes. Instead, they may owe more than the house is worth, particularly for homes purchased four and five years ago. There will almost always be one or two mortgages ahead of the mechanics’ lien, which will have to be satisfied in full before the lienor gets paid. And, Massachusetts has a very generous homestead exemption which exempts up to five hundred thousand dollars of the worth of his/her/their home from attaching creditors. Of course, there are the one or two filters that a subcontractor or sub-subcontractor has to deal with, as with any other lien. Adding to these various and sundry problems, the intrepid successful lien judgment holder will have to hire appraisers, lawyers, auctioneers and incur significant advertising costs in attempting to conduct a sale.
B. Liening commercial properties.
As indicated elsewhere in this article, subcontractors don’t usually have lien rights against the owners of a mall when they work in tenant spaces. Also, with regard to condominiums, there may be no effective lien rights when one works in ‘common areas’. There is going to be, more often than not, financing ahead of your lien that will have to be paid off as to monies paid or committed to prior to the filing of your lien. There are the one or two filters, elsewhere discussed. Then, of course, there are those appraiser fees, lawyers fees, auctioneer fees and advertising costs that one has with attempting to sell a home.
Commercial liens have their unique problems. For example, what do you know about selling a Stop & Shop? Who do you know who has the money (and the interest) to buy a Stop & Shop? What does a Stop & Shop sell for? Forty, fifty, sixty million dollars? And, who else would be interested in owning a Stop & Shop other than Stop & Shop?
I have productively liened churches before. But, when push comes to shove, how does one actually sell a church at auction?
Let’s face it. You’re a subcontractor, material supplier or general contractor. Hopefully, you are good at what you do. But, what do you know about selling a piece of high value commercial property in a depressed economy? How about ‘nothing’ or ‘next to nothing’!
C. Why mechanics’ liens work.
Before you unscrew that cap from a bottle you are not supposed to drink from until after the work day is over, please note that mechanics’ liens frequently do work.
Legally, once a lien has been filed, the lienor comes ahead of any prior bank or financing company on a filed mortgage or construction financing except to the extent that monies have been already paid or committed to be paid on the date the lien is filed. So, assuming we have a ten million dollar commitment and that six million has been paid or committed to on the date a lien is filed, a lienor will come ahead of the bank for the last four million dollars of its note. Two things to know about that. First of all, this flies against the logic and practice of real estate filings, which is first in time, first in right. For a subsequent security interest to be favored over a prior security interest is something that is anathema to generally accepted principles of real estate law. And, banks will not knowingly let this happen. They may consult with periodicals such as Banker and Tradesman and keep abreast of what is happening with their properties. Some banks might check the title to real estate - infinitely easier to do in the computer age - before releasing a periodic draw. So, once a lien has been filed and the bank has actual knowledge of this (or has been notified, perhaps by a helpful lienor), the money flowing to a construction project will simplystop! And, when the money stops flowing into a construction project, everyone becomesanxious!
We use our places of business and our employment to fund our personal lives.
But we can’t do this once the bank has shut down all financing on the job. No requisitions are going to be paid. Material suppliers will be telling you that: (a) they need to get paid; (b) they are not subject to pay-when-paid clauses; ( c ) they are not subject to retention, and; (d) failing payment, your long lead time order at the factory will not be happening.
The other thing that happens with mechanics’ liens is that many mortgages and financing documents provide that if the owner (borrower) allows an adverse security interest (such as a mechanics’ lien) to remain on record for thirty days or more, then this causes an acceleration of the underlying note, meaning that the entire note is now presently due. If the note is accelerated and the property has yet to open, where is the owner going to find the money to pay for the entire thing?
Apart from these legal and contractual factors, the owner will lose confidence in the general (for first tier liens) and the owner and the general will lose confidence in the first tier subcontractors (as to second tier liens). Put very simply, the whole project will rapidly come to a stop.
And, folks, that is how mechanics’ liens work. A potential reordering of the security interests. No more money. An acceleration of the underlying note. A lack of confidence in the general contractor (by the owner) and in the first tier subcontractors by everyone!
5. ESSENTIAL STEPS IN FILING A MECHANIC’S LIEN
For liens by materialmen, subcontractors and general contractors (hereinafter lienors), there are essentially three steps in filing and perfecting a mechanics’ lien.
The first step is to file a ‘notice of contract’. The form is not particularly difficult with the exception of obtaining the legal description of the property in question. The notice of contract, along with all lien documents, has to be filed at the Registry of Deeds having jurisdiction over the town where the property is located. This document has to be served upon the owner after it has been filed by certified mail, return receipt requested.
The second step in perfecting a mechanics’ lien is to file a ‘statement of account’ in accordance with Section 8 of Chapter 254. This form, which is fairly similar to the notice of contract form, actually identifies what amount of money is due (and will ultimately be sued for with regard to the lien). In other words, the amounts in this document limit the ultimate amount of your mechanics’ lien. Again, this form has to be served upon the owner after it has been filed by certified mail, return receipt requested.
The final step in this process is to file a complaint in either the district court or superior court to foreclose the lien. Then, an ‘attested-to’ copy of the complaint has to be filed in the Registry of Deeds within thirty days of the filing of suit. A failure to take any of these required steps in a timely manner will cause the lien to be dissolved by operation of law.
It is important to understand that a lien may be filed at any time after there is a written contract for the project at issue, which contract should reference the project specifically, preferably with a street address. In other words, the lienor does not actually need to be owed money at the time the lien is filed. In fact, the lienor need not even have commenced performance before it has the right to file a lien. In my 36 years of practice, the vast majority of notices of contract I have seen were where the filing party claimed to be owed monies. To do otherwise will incur the Wrath of Everyone, which can be a truly fearful experience.
Subcontractors improve their ultimate rights by filing liens sooner rather than later, as the wording of the statute as applies to subcontractors states that a subcontractor’s lien “. . . 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.” Therefore, an earlier lien presumably is supported by greater contract balances due to the general contractor than a later lien would have. Moreover, my experience has been that earlier single liens tend to get paid earlier (and more often) than later liens, particularly where the later liens constitute a group filed at a time that the project clearly has problems.
A “written contract” now means: “any written contract enforceable under the laws of the commonwealth”. Thus, one would think that the contract does not necessarily have to be all on one piece of paper. It is important, however, to understand that without a ‘written contract’ there are no lien rights in Massachusetts for anyone other than individual, personal liens. Some material suppliers avoid the use of written contracts. They say that written contracts are too much work. They say their work environment is too fast moving. They say that by not requiring written contracts, this gives them some kind of sales advantage. Often, however, they don’t require written contracts because they don’t understand the lien procedures.
However, having a ‘written contract’ is nowhere near as difficult as people think. This is discussed in more detail in some of our other papers, such as “Understanding and Negotiating Subcontracts”, found at our website. Having a simple form titled “order acknowledgment” indicating the address of the property and indicating generally what will be provided at what price, signed by both parties will probably meet this requirement. It may be that the description of what is to be done can be as simple as “pipes and accessories from our catalogue at current prices as ordered by the customer”. In fact, there was a court case some years back that suggested - although it did not specifically hold - that having provisions in the credit application to the effect that both parties recognize that the credit application itself will fulfill the need for written contracts for mechanics’ lien purposes may go a long way to meeting this requirement.
How simple can a written contract be? “I will paint your house with one coat primer, one coat finish paint for the sum of four thousand dollars”. Add two signature lines - painter and customer - and you have a written contract. Now, please note that this is not a good contract. A lot of variables have been left out. When will the work be done? What paint brand will you be using? When are you going to start? I simply am making the point that the above contract is as much of a ‘written contract’ as any AIA series of documents in the sense that they both meet legal minimums.
Massachusetts does not permit liens on public lands (MGL, C. 254, s. 6). Also, any provisions in contracts barring the filing of a mechanic’s lien are void as against public policy
(MGL, C. 254, s.32). Thus, if your company has a provision in your contract barring liens, you can still file legal liens. There are some specific exceptions with regard to general contractors that should be studied by general contractors.
Subcontractors must provide “actual notice” of notices of contract to the project owner, which should be understood as by certified mail, return receipt requested with a green card or delivered by a disinterested third party, such as a constable with proof of delivery. While some portions of the lien statute do not contain the same requirement of actual notice, good practice suggests that service of lien documents in a similar manner is a good idea for both subcontractors and general contractors alike at every step of the process. Namely, one wants proof from a disinterested person - either the U. S. Postal Service or a constable - that the individual you have sent your documents to actually received them. With vehicles such as first class mail, there is an evidentiary presumption that the addressee actually received the document. However, this is a rebuttable presumption. Namely, if the addressee says that “I didn’t receive it”, one will not otherwise be able to demonstrate compliance with ‘actual notice’ requirements.
At our office, we file a lot of liens. We usually start with certified mail, return receipt requested. Under certain circumstances - the addressee won’t accept the letter, there isn’t enough time to use the mails - I use a state-wide constable service. Starting at five pm on any given afternoon, I can have someone served in-hand all over the state by noon the next day for about fifty dollars. This is an inexpensive price to pay in protecting your rights under the mechanics’ lien statute!
A practice point. More knowledgeable general contractors know that when a second tier material supplier or subcontractor attempts to present them with a certified letter, this can’t be anything good. What does the general contractor do? For one thing, it can refuse to sign for it. The claimant may have sent the certified letter within enough time for the general contractor to receive it in time. However, the statute is not satisfied by mere intentions; the statute requires accomplishment of a task. So, whenever you send out a notice letter to someone certified mail,
return receipt requested, make a note on your calendar to check for the green card in the next week to ten days. If you don’t have the green card by then, chances are that you will never get it and your notice will have failed. Thus enters the constable!
Another thing to be said about the use of constables when meeting an ‘actual notice’ requirement. One time, I didn’t have enough time to send a bond notice certified mail to a
general contractor. So, I had a constable serve one of the owners at his house. This must have attracted some attention, as the matter was settled (and paid) shortly afterwards. One reason that a lot of cases settle on the courthouse steps on the day of trial is that none of us is particularly interested in taking on ‘the government’ to resolve a dispute. We don’t like receiving subpoenas telling us to appear at a certain time or place (or else). For many, uniformed bailiffs and court officers walking around with hand-cuffs and badges, judges perched above them covered with black robes banging wooden gavels on their benches and the very formal (and cold) physical attributes of a courthouse induce fear responses. There is always hustle and bustle and, usually, any number of policemen of one kind or another are walking around. Particularly in the district court, the halls are filled with miserable and fearful people. In a minor way, a constable serves to remind one of this system, which aura sometimes adds value to his or her actual actions.
A word on forms. The content of what should be in the various documents is indicated in most of the various statutory sections. For example, Section 2 of C. 254 describes the notice of contract for the general contractor. Section 4 of C. 254 describes the notice of contract for the subcontractor as well as the content of the notice of identification. The requirements for a subcontractor notice of contract are somewhat different from the requirements for a general contractor notice of contract, particularly in identifying the various cost elements of the subcontract in question. Section 2A of C. 254 describes the notice of substantial completion. Section 2B of C. 254 describes the notice of termination. Section 12 of C. 254 describes the content of the project-wide lien bond. (More on this later.) Section 14 of C. 254 describes the content of lien bonds executed specifically to ‘bond off’ specific liens. (More on this later.) Other sections, however, are somewhat less descriptive, such as the content of a dissolution of lien (Section 10 of C. 254). All forms are to be notarized, as is required by Section 30 of C. 254.
As this statute is only sixteen years old, there have not been a lot of appellate cases yet which have interpreted it. Sixteen years, in human terms, seems like a fairly long period of time. In the court business, such is not the case. After all, the Suffolk County Courthouse in Boston, MA built in the late 1930's is still referred to by many as ‘the new courthouse’! A great many of those cases that have been decided deal with the rights of material suppliers. Any statute is better understood by the court cases which interpret it and this statute is more complicated and legalistic than many.
6. WHEN AND HOW A LIEN MUST BE FILED
A party must file the notice of contract not later than the earliest of: (1) sixty days after the filing or recording of the notice of substantial completion; or (2) ninety days after the filing or recording of the notice of termination; or (3) ninety days after the last date a person entitled to enforce a lien under section two of the new act - relating to general contractors - or anyone claiming by, through or under the general contractor performed labor or materials or performed or supplied both labor and materials to the project. (Emphasis added) While not specifically defined in the statute, this is believed to mean the general contractor and any of its subcontractors working under and with regard to the general contract.
A party must file a statement of account within the earliest of ninety days after recording the notice of substantial completion or within 120 days after recording the notice of termination or within 120 days after the last furnishing of labor or materials or rental equipment or tools by or through the general contractor.
The suit to enforce the lien in the superior or district court has to be filed within 90 days after filing the statement of account and an attested-to copy of the complaint has to be filed at the Registry of Deeds within 30 days of the commencement of the civil action.
7. LIENING THE OWNER’S INTERESTS, LEASEHOLDS AND WORK IN THE COMMON AREAS OF CONDOMINIUMS
A. Liening the Owner’s interests and the tenant’s interests.
Under older Massachusetts law, an owner actually had to enter into an agreement itself/himself to be chargeable with a mechanics’ lien. An older case held that even where an owner of land knew that a building was being erected on his land, this was not sufficient to constitute consent on the part of the owner for the performance of that work under the mechanic’s lien law.
Liens in situations where the subcontractor or general contractor worked directly for a tenant generally mean that a lien is not against the Owner’s interests (as to the subcontractor) and may be against the owner’s interests (for the general contractor) if a couple of extra steps are taken by the general contractor as outlined below.
M.G.L.A. 254 § 25 provides:
“If the person for whom the labor has been performed or with whom the original contract has been entered into for the whole or any part of the erection, alteration, repair or removal of a building or structure upon land, or for furnishing material therefor, has an estate less than a fee simple in the land or if the property is subject to a mortgage or other encumbrance, the lien shall bind such person's whole estate and interest in the property, and such estate or interest may be sold and the proceeds applied according to this chapter.”
Many of our readers lease their office facilities and/or vehicles. A leasehold interest is a lesser interest than a ‘fee simple’, which is, essentially, a complete ownership interest. Leaseholds have other very complicated issues. Many times - perhaps, most times - leases are not filed at the registry of deeds. In addition, what might be foreclosed upon may only result in the lienor assuming the lessee’s interests and responsibilities.
If you, as a subcontractor, lien a mall for work in a particular tenant’s space, case law seems reasonably consistent that this does not amount to a lien on the owner’s interest in the mall. Due to a difference in the wording of the general contractor’s right to file a notice of contract - Section two of C. 254 - and the wording of a subcontractor’s right to file a notice of contract - pursuant to Section four of C. 254 - a general contractor under certain circumstances may be able to file a lien against an owner’s interests in the mall, even though a subcontractor probably can not file a mechanic’s lien as to the owner’s interests in the mall. Assuming that the general contractor’s contract is with a property manager for the performance of work at a mall, what seems to be needed to potentially hold the owner responsible is: (a) evidence that the owner of the mall knows that such work is going on; (b) some evidence of the owner’s concurrence with the work being performed.
A case explaining the disparate treatment of subcontractors and general contractors as to the owner’s interests is the case of Trace Const., Inc. v. Dana Barros Sports Complex, LLC
459 Mass. 346, 945 N.E.2d 833, 840 - 841 (2011)
General contractors and subcontractors, who had been hired by lessee to perform renovation work on leased property, brought actions to enforce mechanics' liens against lessee's leasehold interest in the property and against the lessor's fee interest (ownership interest) in the property. After trial, the judge determined that the general contractors and subcontractors had established valid liens against the leasehold interest but denied all claims asserting liens against the lessor's fee interest. The general contractor, the subcontractors and the lessor appealed. On appeal, the Supreme Judicial Court (SJC) held that: (a) the general contractors held valid liens on the lessor's fee interest; (b) the subcontractors did not have valid liens as to the lessor's fee interest.
This was the operative language, according to the Court, as to the general contractors’ lien rights, taken from MGL C. 254, s. 2:
“A person entering into a written contract with the owner of any interest in real property, or with any person acting for, on behalf of, or with the consent of such owner for [relevant work] shall have a lien upon such real property ... owned by the party with whom or on behalf of whom the contract was entered into....” (Emphasis added)
The Court held that the owner’s consent does not have to be written to be effective. It reviewed prior law discussing the issue of consent:
“To conclude that a person has consented within the meaning of the mechanic's lien statute, we have thus required something more than awareness of an intent to perform work, or awareness of ongoing work, and a failure to object. In the present cases, prior to agreeing to a lease, Madigan (the owner) and Barros had discussed Barros's plans to hold his basketball camp in the building, and Barros told Madigan that he planned to renovate the building for that purpose. Madigan visited the site while work was ongoing on a few occasions, and saw the building regularly on his commute to work. He never objected to the renovations. Those facts, standing alone, may well fall short of establishing Madigan's “consent” under our prior case law.”
However, other actions taken by Madigan were sufficient to establish ‘consent’.
These were the other actions: (a) the lease included a provision stating that the premises could only be used as a “recreation facility”; (b) the lease also provided that any such “alterations, improvements, additions and/or renovations,” were to “remain for [the] benefit of [Madigan] and the demised premises and shall not be deemed the property of the [Camp];” ( c ) Madigan would have the option to own the renovations undertaken to convert the space into a recreation facility; (d) Madigan never objected; (e) Madigan testified that he “priced the rent relatively low at the time” because he felt that if Barros made the investment in the property, he would receive an attractive rent.”
The subcontractors, on the other hand, only had an interest in the leasehold interest of the tenant. The following is from the decision, discussing subcontractor rights under section four of MGL C. 254:
“That section provides that, upon proper filing of notices, “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.” Id. This provision is notably distinct from § 2, the provision governing general contractors, in that the subcontractor's lien is limited to the property owned by the party who entered into the original contract; it does not extend to the property owned by a person for whom, on whose behalf, or with whose consent the contract was made. As the party who entered into the original contract—the Complex—was not a fee owner, the subcontractors' lien, by the terms of the statute, does not extend to the fee interest.” (Emphasis added)
“The Legislature may well have chosen to treat subcontractors differently as a result of subcontractors' more attenuated relationship with the owner of property, or with the understanding that subcontractors would enjoy broader protection by virtue of their claims against the general contractor. Whatever the rationale, we will give effect to the plain meaning of the text where, as here, the chosen language does not produce an illogical result. See Sullivan v. Brookline, 435 Mass. 353, 360, 758 N.E.2d 110 (2001).”
Ironically, as the Court pointed out, the prior language of Section 4 - prior to the 1996 amendments - would have allowed a lien as to an owner’s interest by subcontractors. Was this changed deliberately with the 1996 amendments? Was this a right that was negotiated away in order to get owners to sign off on the legislative changes? Or, was this a change which did not occur intentionally? Perhaps, only The Shadow knows. And, as far as I know, he’s not talking!
B. Liening common areas of condominiums.
In the case of Business Interiors Floor Covering, Inc. v. Basepoint Contracting, LLC et al, Norfolk Superior Court CA 2009-01646, a judge in the superior court considered whether or not the common areas of a condominium could be liened by various plaintiff subcontractors. The Court held that they could not.
The Court pointed out that the condominium statute, MGL C. 183A, s. 13 specifically provides that: “all claims involving the common areas and facilities shall be brought against the organization of unit owners, and all attachments and executions related to such claims shall be made only against common funds or property held by the organization of unit owners and not against the common areas and facilities themselves . . .” The Court referenced another case with similar facts in which was said “the use of a mechanic’s lien against only the common areas of a condominium is akin to trying to insert a square peg into a round hole. It simply does not fit.”
(Powder Mill Builders, LLC v. Powder Mill Square, LLC et al, 7 Mass. Super. Ct. April 6, 2009). The Court included a further quotation from the Powder Mill case: “ What value do the common areas have separate and apart from the unit owning undivided percentage interests in the common areas? What interest would be conveyed to a purchaser, even assuming there is any market?”
Some suggestions for better collection efforts, not necessarily limited to liens. Always try to get some evidence from your contracting party that it acknowledges you have substantially performed your work and that you are owed some percentage of, if not the entirety of, what your contract claim might be. People tend to be a great deal more careless - honest? - in emails. Therefore, attempting to get your contracting party to acknowledge the debt may have wide ramifications in other collection efforts apart from pure mechanics’ lien rights and pursuits. And, it is always important to try to keep track of where your contracting party is working elsewhere for the possible purpose of filing an action to reach and apply, which means, in essence, an action to attach an interest that your contracting party may have in another contract to fund the debt due from the one in question. Massachusetts allows for such attachments, assuming that you meet the various tests for obtaining an injunction and your claim is reasonably clean and clear. Lastly, liens that work tend to work relatively quickly in, say, two to four months. Also, my experience has been that earlier single liens have proved more productive than later liens where there is a group of lienors. The longer a lien goes without working, the greater the chance (or possibility) that it won’t work.
Here’s another idea. On projects where the evidence seems to be that the owner is not paying the general contractor, many times, general contractors will not be adverse to subcontractors filing mechanics’ liens. In fact, in certain circumstances, the general contractor might actually welcome the subcontractor lien. In this type of situation, the general contractor may get the actual benefit of the filed lien without having had to incur the cost of filing one, including, without limitation, the wrath of the owner.
Payment bonds are almost a form of guaranteed payment for material suppliers and subcontractors, assuming the claims are valid, not subject to counterclaim and the payment bond surety remains in business. (Usually the case, although there have been some exceptions!)
Mechanics’ liens, while useful, don’t have a similarly high chance of payment. As such, other potential remedies should always be in mind. Collection efforts and remedies, particularly with larger claims, should always be considered cumulatively not ‘I’ll do this one and won’t do that one.” A la carte may be a way to order in a restaurant but often doesn’t result in a whole meal.
Depending on how large your lien is, how much you really need the money, the personalities of the various players and the difficulties of the job itself, other possible avenues to get paid should be considered. For example, on a larger claim with excellent payment bond prospects, I might still file a mechanic’s lien. The lien might be useful in stimulating earlier payment than a payment bond claim might accomplish.
Here’s how I look at collection efforts. If your debtor does not have the ability to pay you – apart from something such as through a mechanics’ lien or payment bond claim – you are not going to get paid. It’s as simple as that. You can’t get blood from a stone. And, by the time someone actually files bankruptcy, some degree of thought – perhaps, a lot of thought – has gone into making sure that mere trade debt gets paid absolutely nothing. This is especially true in a Chapter Seven case but is also largely true in a Chapter Eleven case. In a Chapter Eleven, for trade debt to collect any more than ten to twenty cents on the dollar – often on an extended payment plan – would be about all one could expect.
A premise to collection efforts is that the debtor does have some ability to pay you. What I have found is that some people and companies who have the ability to pay simply won’t until the cost of not paying exceeds the cost of paying. For those individuals, it may take stimulation through several different mechanisms and avenues to reach that point. Pursuing multiple collection strategies helps to make this happen. In the gym, they say ‘no pain, no gain’. Sometimes in order to resolve disputes with difficult customers, there has to be a sufficient element of pain. Their pain. And, this will often require using multiple approaches in order to get paid.
C. 254, s. 7 describes the priority of liens by subcontractors and general contractors as to existing mortgages. In each case, such liens do not take priority over existing mortgages as to monies actually advanced or unconditionally committed prior to the filing of the notice of contract. However, lienors will generally go ahead of the mortgagee in terms of priority as to future monies that have not yet been advanced or unconditionally committed prior to the filing of the notice of contract. This is at the very heart of a mechanic’s lien. Much as a physical body depends on the free flowing of blood, the health of a commercial body requires the free and predictable flow of money. And, since a lienor will actually go ahead in terms of priority of a previously existing mortgage, once there is a lien, the banks stop advancing money. More than anything, this is what causes liens to work (when they are capable of working), generally quicker rather than later.
That section goes on to say that as to purchasers of the real estate - other than the owner who entered into the written contract upon which the lien is based - the lien will not avail against them if the deed or other instrument of title was recorded prior to the filing of the lien. This is another argument in favor of earlier rather than later liens.
Section 13 of the statute says that attaching creditors do not prevail against previously filed mechanic’s liens by subcontractors and general contractors on file prior to the recording of the attachment:
M.G.L.A. 254 § 13
“The rights of an attaching creditor shall not prevail as against a lien under section one, nor against the claim of a lienor where notice or notices of contract have been filed or recorded in the registry of deeds under sections two and four prior to the recording of the attachment. An attachment recorded prior to the filing or recording of the notice of contract shall prevail against a lien, other than for personal labor, to the extent of the value of the buildings and land as they were at the time when the labor was commenced or the material furnished for which the lien is claimed, and in case of a sale under section eighteen the court shall determine what proportion of the proceeds of the sale, as derived from the value of the property at such time, shall be held subject to the attachment. . . .”
Section 21 of the statute indicates that where there are multiple liens on a piece of property and the value of the real estate is insufficient to satisfy them all, then there will be a distribution among them in proportion to the amount due each and without regard as to when each lienor filed its notice of contract. Thus, under these circumstances, the lienors will have pro rata shares.
9. LEASED EQUIPMENT/TOOLS
These are specifically provided for under Section 4 of C. 254, which states that a lien may be filed by one who furnishes “material, or both labor and material or furnishes rental equipment, appliances or tools under a written contract with a contractor or with a subcontractor of such contractor. . . ”
10. SUBDIVISION/UTILITIES
Under the preexisting law, it appears that a mechanic’s lien could only be filed with regard to the construction of a building. Under the new amendments to the statute, what is capable of being liened is defined as relating to the “erection, alteration, repair or removal of a building, structure or other improvements to real property”. (Emphasis added) This is a broader definition and would seem to encompass more than only a building. One would imagine that a fence or swimming pool, for example, would be considered an improvement to real property but not something subject to a lien under the old statute if there were no attachment to a building. Therefore, it would appear that utility work and subdivision work would be covered, at least until such time as such roads and utilities are turned over to a public owner, as they meet the definition of being “improvements to real property”.
11. RENOVATION/REPAIR WORK
The statute specifically applies to both ‘alteration’ and ‘repair’ of ‘a building, structure or other improvement to real property’. Thus, there is coverage for renovation and repair work, assuming that otherwise this work qualifies for a mechanic’s lien (i.e. there is a written contract for the renovation or repair).
12. LIEN WAIVERS
The statute provides for partial waivers and subordinations of liens to be given by general contractors who have filed notices of contract. This statutory section (Section 32) provides specific content to be contained within the form.
Section 32 also provides generally - with some exceptions - that contractual terms barring the filing of liens are unenforceable:
“A covenant, promise, agreement of understanding in, or in connection with or collateral to, a contract or agreement relative to the construction, alteration, repair or maintenance of a building, structure, appurtenance and appliance or other improvement to real property, including moving, demolition, professional services and excavating connected therewith, purporting to bar the filing of a notice of contract or the taking of any steps to enforce a lien as set forth in this chapter or purporting to subordinate such rights to the rights of other persons is against public policy and is void and unenforceable . . .”
Under Section 33 of the act, a failure on the part of the general contractor to supply a lien waiver with regard to the project after having filed a notice of contract may constitute grounds for a mortgagee to refuse to make advances of construction financing.
I have seen many purported lien waiver forms which general contractors require subcontractors to sign as a condition to payment which in terms of content greatly exceed any reasonable requirement for a lien waiver, often approaching, if not actually constituting, actual releases. Remember, that a ‘lien waiver’, strictly speaking, is only an exclusion as to this particular form of remedy, having no effect on other options to get and be paid. A party may have released lien rights but could still sue on a bond, sue on the contract, try for bank and real estate attachments, etc. A ‘release’, however, actually extinguishes your claims, in whole or in part. Extreme care should be exercised by all materialmen and subcontractors in executing lien waivers to make sure that no rights are being released and that rights to seek extras, claims and retention are identified and reserved. One should keep in mind that since public work can not be liened, requiring a lien waiver in consideration of a payment on a public job is without legal significance other than simply obtaining some form of partial or complete release. In the final analysis, when a ‘lien waiver’ is required for public work, the only thing the requesting party is doing is attempting to get you to sign a release, whether a partial release or a complete release. Readers of this article are referred to the website - www.sauerconstructionlaw.com - to our article “Making Sense of Lien Waivers and Releases”. Not understanding how these documents work can simply croak you. Remember the FRAM oil filter guy commercial? “You can pay me now or you can pay me later”? You either understand what lien waivers and releases mean now, before you sign them, or you might, at your peril, discover what they really mean later.
I recognize that for most of my readers – probably, for all of my readers – legal fees are not your most favorite thing. I accept that. But, at the same time, through the use of people with specialized knowledge, such as lawyers, by dealing with a particular problem before it arrives or as you are dealing with it currently is almost always going to be more effective and is very likely to be a lot less expensive than trying to resolve a situation where a lot of errors have been made. If you look at my website, you can see that there is a lot of content there. It has taken a small fortune of my time to write all of these articles. This is evidence of my commitment to my core constituency – the construction industry. After all, this information is ‘out there’ and ‘no salesman will call’. In terms of the time it took to write all of these articles – this article – I have spent a small fortune. But, these materials won’t benefit you if you don’t/won’t read them!
One of our sayings concerning our seminars is that “Knowledge is Money in Your Pocket.” But, for that money to be in your pocket, you’re going to have to work at it a bit.
13. FILING YOUR OWN LIENS
The first question is: can I do this myself? Many counties’ records are on-line and one with some determination and perseverance should be able to find the ‘legal description’ of the real estate in question, which is, perhaps, the hardest element in preparing effective notices of contract and statements of account.
Some specialized (legal) knowledge may be required as to some liens. For example, the land in question may only be ‘recorded land’. Sometimes, the real estate in question is ‘registered land’. Sometimes, it has elements of both. Sometimes, the property - e.g. the Solomon Pond Mall - is located in two different towns and in two different counties. A lawyer with white hair comes by it honestly! Even if that seems to be an oxymoron!
The second question is: should I do this myself? The real question is can you live with the fact that your lien might be invalid if you miss a step?
There is some minimal law that says your paperwork does not have to be absolutely perfect to survive an attack.
For example, M.G.L.A. 254 § 11. Action to enforce lien; time to commence; validity of lien, provides:
“. . . . . The validity of the lien shall not be affected by an inaccuracy in the description of the property to which it attaches, if the description is sufficient to identify the property, or by an inaccuracy in stating the amount due for labor or material unless it is shown that the person filing the statement has wilfully and knowingly claimed more than is due him.”
At the same time, this is about all of the error the statutory framework seems to allow. Unlike claims against payment bonds, which are broadly construed in favor of the claimants by judicial decisions, mechanics’ liens are very narrowly construed as some recognition of an owner’s rights. After all, a man’s home is his castle. The law has traditionally given some respect to that principle. Here is what the cases have to say:
The mechanic's lien statute is strictly construed against the party claiming the lien. M.G.L.A. c. 254, § 1 et seq. Golden v. General Builders Supply LLC, 441 Mass. 652 (2004.) Statutes governing the creation, perfection, and dissolution of a mechanic's lien are strictly construed against the party claiming the lien. M.G.L.A. c. 254, § 1 et seq. National Lumber Co. v. United Cas. and Sur. Ins. Co., Inc., 440 Mass. 723 (2004). The mechanic's lien statute is strictly construed against the party claiming the lien. M.G.L.A. c. 254, § 2. Ng Brothers Const., Inc. v. Cranney, 766 N.E.2d 864 (2002). Statute creating a mechanic's lien in favor of subcontractor supplying labor and materials is in derogation of common law and, thus, is strictly construed against one claiming a lien under its provisions. M.G.L.A. c. 254, § 4. National Lumber Co. v. Fort Realty Corp., 1999 Mass.App.Div. 235. A mechanic's lien is a creature of statute, and can be enforced only by strict compliance with the statute. M.G.L.A. c. 254, § 1 et seq. National Lumber Co. v. LeFrancois Const. Corp., 1998 Mass.App.Div.216.
We see many situations where lawyers themselves file incomplete and potentially unenforceable liens. More than occasionally, a lawyer will contact us to ask for advice in a lien situation. In fact, the State Law Library, of its own initiative and without discussing this with us, specifically links itself to our website - www.sauerconstructionlaw.com - on mechanics’ lien issues. “Findlaw”, which is part of West Publishing Company or ‘Westlaw’, the leading legal research service for lawyers in the United States, also includes in its resources an article I wrote concerning mechanics’ liens.
Here are some factors suggesting when you should not try to do this yourself. One would be if you worked on a condominium: very complicated. Another might be if you worked at a shopping mall. Liens with registered and recorded land both are more complicated. If the lien is for significant money - different subcontractors and general contractors would have different amounts for this - I wouldn’t recommend that you chance it.
I think that to be on the safe side, if you prepare the notice of contract or statement of account (or both) yourself, you should have them reviewed by counsel before they go out.
Please keep in mind that the last step in filing a lien is filing suit to foreclose the lien. Under Massachusetts law, corporations can only file legal actions by and through an attorney.
In the case of Varney Enterprises, Inc. v. WMF, Inc., 402 Mass. 79, 520 N.E.2d 1312, 1313 (1988), the Supreme Judicial Court said, on this subject: “In this case, we hold that, except for small claim matters, a corporation may not be represented in judicial proceedings by a corporate officer who is not an attorney licensed to practice law in the Commonwealth.”
And, on page 1314, the Court continued: “With the limited exception of small claims proceedings, a thorough familiarity with procedural and substantive rules of law on the part of responsible advocates bound by rules of discipline is a prerequisite to the efficient functioning of courts and the proper administration of justice.”
So, keep in mind that at some point, this will probably have to be handed over to counsel.
14. STALE LIENS
As stated elsewhere in this article, the failure to take a necessary (and timely) step in the filing of a mechanic’s lien generally means that the lien is dissolved at that point as a matter of law.
However, any lien, even an ineffective or abandoned lien, will remain on the title of a piece of real estate virtually forever.
One may ask: “I care about this . . . why?” The short answer to this is that most title examiners assume, for their purposes of certifying title, that any possible impairment to title - such as a mechanic’s lien document - is effective and valid. Thus, leaving a document on record after you have decided to abandon the lien (e.g. too expensive to file a complaint, as the claim is too small) can and does interfere with an owner’s ability to either convey good and marketable title to the property and/or to refinance the property. When owners realize that your ineffective, elderly lien documents may be seriously interfering with their ability to do various things with the property, they are not - charitably speaking - amused. This can cause hurried calls to the putative lienor and/or his/her/its attorney, if this individual can be identified. The message may be: ‘take your lien off the title or we will sue you for damages’. Although I can not cite to you a case saying that leaving an ineffective, abandoned mechanic’s lien on an owner’s title is an unfair and deceptive trade practice, I can envision a court so holding. Moreover, sometimes a lienor will tell the owner at such a point in time as being asked to remove the lien that “I didn’t get paid, so I am not taking it off until I get paid.” That statement itself might be an unfair and deceptive trade practice prohibited under MGL C. 93A.
A few things to keep in mind. It is easier for a consumer to win against a business under C. 93A - claims for unfair and deceptive trade practices - than it is for a business to win against a business under the same statute. We keep in mind that a successful claimant under C. 93A can win double or triple damages plus actual attorneys’ fees. Moreover, a contractor’s telling a homeowner that he will not take off his lien absent payment even though the lien is dead as a doornail, legally speaking, seems to meet one of the judicial definitions of what an unfair and deceptive trade practice is: “Conduct that causes one inured to the rough and tumble of commerce to raise an eyebrow.” Apart from having a homeowner sue you for damages over a lien that can not work for you under any set of circumstances, a homeowner can - and very well might - sue you in an action for ‘summary process’ under the lien law to have a court declare your lien invalid and to have it removed from the title. This procedure is provided for by MGL C. 254, s. 15A, which provides:
“If any person in interest, including but not limited to an owner, contractor, or mortgage holder, claims (a) that any person who has provided labor or materials or has agreed to provide funding, financing or payment for labor or materials, refuses to continue to provide such funding, financing or payments of labor or materials solely because of the filing or recording of a notice of contract pursuant to section two or a statement of claim referencing a lien under section one, or (b) it appears from the notice of contract or a statement of account that the claimant has no valid lien by reason of the character of, or the contract for, the labor or materials or professional services or rental equipment, appliances or tools furnished and for which a lien is claimed, or (c) that a notice or other instrument has not been filed or recorded in accordance with the applicable provisions of this chapter, or (d) that for any other reason a claimed lien is invalid by reason of failure to comply with any provision of this chapter, or (e) that any party's rights are foreclosed by a judgment or release, or (f) that any party wrongfully refuses to execute a notice of completion as required by section two A or improperly files or records a notice of termination under section two B, such person may apply to the superior court for the county where such land lies or in the district court in the judicial district where such land lies, for an order (i) ruling on the matter involved or (ii) summarily discharging of record the alleged lien or notice as the case may be. The holder of any recorded mortgage upon the affected property shall receive notice of and be entitled to appear and be heard in any proceeding brought under this section. An order of notice to appear and show cause why the relief demanded in the complaint should not be granted shall be served upon the necessary parties no later than seven days prior to the date of the scheduled hearing. If the necessary parties cannot be found, such service may be made as the court shall direct. The application shall be made upon a verified complaint accompanied by other written proof of the facts upon which the application is made. Upon granting or denying the application, the court shall enter a final judgment on the matter involved or expeditiously order such further proceedings as are just.”
What does this mean? It means that a party in interest - such as a homeowner - can go into court and ask a court to dismiss your lien if for any reason it does not comply with the lien statute. Other than having the prospect of potentially paying damages in such a situation, you will, at least, have to incur the cost of defending yourself. And, I can think of at least two different theories of awarding attorneys’ fees against you in such a situation - under Rule 11 of the M. Rules Civ. Procedure (in very limited circumstances) and under MGL C. 231, s. 6F - completely apart from an ultimate action against your company under C. 93A, which also includes an attorney’s fee award. And, if you let a lien go by not perfecting it, what possible justification could you give to the court for forcing a homeowner to go into court and have to spend several thousands of dollars to have the lien declared invalid?
If you are not going to pursue a lien, a prudent course of action might be to file a timely dissolution of lien of that lien to avoid all of these potentially difficult consequences.It might be that before doing so, you might discuss with the homeowner the possibility of a percentage payment of your lien so that you might get something. In the final analysis, there could be potential downside in leaving your lien documents on the title when you have effectively abandoned your mechanic’s lien.
15. LIEN BONDS AND OTHER ARRANGEMENTS
Obviously, one hopes that by filing a lien, this will result in a fairly quick payment of most, if not all, of your lien. Many times, for a variety of reasons, this might not happen.
The lien law contains two different lien bond provisions under which you might get paid.
Under the first provision - Section 12 of MGLA C. 254 - there is the possibility that contemporaneously with commencing performance of the project, the general contractor may have posted a project-wide lien bond as provided for by Section 12 of this law. Under this section, once such a bond has been filed with the registry of deeds, the registry of deeds is not supposed to accept any liens for filing. A subcontractor’s sole remedy in such a situation is to pursue the lien bond. My sense is that this type of bond is not filed as frequently as it was thirty years or so ago. At that time, a surety company would often provide such a bond as a complement to payment and performance bonds, possibly with no additional charge. This was the surety’s thinking. Where the condition (the promise) of a project-wide lien bond is very similar to that of a payment bond, this doesn’t really add to a bonding company’s exposure. This is essentially true, although payment bonds and project wide lien bonds are triggered differently, at different times and in different ways. In our practice today, we seldom see a project wide lien bond on file. Still, be aware that such might be a possibility, although an unlikely possibility at that.
A more realistic possibility is that a ‘party in interest’ (a general contractor or owner) might “bond off your lien” at some point in the process by recording a specific lien bond as to your claim alone, as is provided for by C. 254, s. 14. Several things. First, as a lienor, you have absolutely no control over whether or not this happens. It either happens or doesn’t happen and you essentially have nothing to say about this. Second thing. Once the lien bond has been filed at the registry of deeds and you have been notified as to this fact, your lien is dissolved as a matter of law and you have 90 days to sue the lien bond to make a recovery. Third thing. I love suing bonding companies. A bond is infinitely superior to a lien for some of the reasons indicated elsewhere. Bonding companies usually settle. My lien is (comparatively) completely secured.
What other arrangements might interest me in releasing my lien? A quick answer to that would be: isn’t there more than one way to skin a cat? In some circumstances, an immediate payment as to a lien may not be possible. It may be that some other event - such as approval and payment of a contested change order - has to occur before payment can be made. It may be that while there is some money available to pay your lien, due to the number and amount of the liens, it will be necessary to convince a pool of lienors to take a percentage distribution on their liens (which is all they might get under a lien if processed to the end in any event.)
So, you might be contacted. “I’ll pay you X if I can (a) get a change order for the subject of your lien; (b) get everyone else to sign on the dotted line for a partial payment.” There could be other possible potential results. Sometimes, you might be asked to provide a dissolution of lien to be held in escrow by an attorney pending a closing (sale) of the property. I am sure there are other possible situations whereby I would consider releasing a lien, if only provisionally.
If you have read this whole article - a good thing to do if you are Catholic and wish to shorten the time you will have to spend in Purgatory - you already know that the prospects for payment for a mechanic’s lien aren’t all that spiffy if the whole process is followed to an end. Another thing to think about. What if you are not a Catholic? And, you are mistaken?!
You make business deals every day of the week. Sometimes it makes sense to execute a dissolution of lien and to have some attorney hold it in escrow pending payment of some sum of money under some conditions.
The author, by his own experience, observes that the filing of mechanic’s liens in Massachusetts is viewed as a hostile act and has less acceptance in the business community than he has seen, for example, in Connecticut. One of the ideas behind the 1996 amendments was to make the process seem less hostile and adversarial, particularly with regard to notices of contract filed by general contractors and with the provision of the new procedure for notices of identification (which are not, strictly speaking, actual mechanics’ liens.) The author observes that hostility to liens is alive and well even after these amendments, particularly with regard to subcontractor liens. Life being as strange as it is, it is not uncommon for general contractors to encourage their subcontractors to file liens in situations where the general contractor is having trouble getting paid. When that happens, the general contractor may obtain the benefit of having filed a lien itself without the blame and threats associated with it.
Generally speaking, the culture of the business community seems to militate against premature notices of contract, although one can legally file a notice of contract as soon as there is a written contract and before one has even commenced the performance of work. A lien can be filed before one is even owed money. Irony being one of the eternal principles of life, it may be that because of how the business community views mechanic’s liens, this is a factor in making them effective in collection work by either obtaining payment or the ‘bonding off’ of individual liens, as is provided for by section 14 of C. 254.
Lienors should keep in mind that mechanics’ liens must be filed in the county where the property is located (because of principles of in rem jurisdiction) and not in a county where either party does business, as would be allowable in a simple contract action (because of in personam jurisdiction) if that county is not where the project is located.
This is a fairly complicated statute. Assuming that a material supplier, subcontractor or general contractor understands the requirements of the statute - and has an understanding or ability as to how to obtain or perform title rundowns so as to get the ‘legal description’ of the real estate - filing notices of contract and statements of account can possibly be done safely, although prudence would suggest consulting with counsel: (a) on larger liens; (b) where an inability of your contracting party to pay the debt in an action in simple contract is presumed;
( c ) in most situations involving work for tenants at a mall, and; (d) in the case of complicated titles such as all condominiums and larger parcels of land that are both recorded and registered. Caveat emptor along with the teaching of many court decisions that the mechanic’s lien statute is strictly construed against those filing liens should be taken into consideration in making a decision to attempt such filings without professional guidance. Under Massachusetts decisional law, a corporation can only represent itself in court for small claims matters and not otherwise. Thus, an attorney should represent those corporate subcontractors and general contractors who need to file suit to foreclose on their liens. Now, let’s look at some of the sample forms:
M.G.L. c. 254 §4
Notice is hereby given to _________________, as contractor, that ________________,
as subcontractor/vendor, has entered into a written contract with _________________ to furnish
labor or materials, or labor and materials, or rental equipment, appliances or tools to a certain
construction project located at ________________ (Street Address), ____________________
(Town or City), Massachusetts. The amount or estimated amount of said contract is
$__________. (No amount need be stated for contracts for the rental of equipment, appliances
or tools).
Subcontractor/Vendor: Pick-up Truck with Two Magnetic Signs, Inc.
County of Essex Date:
Then personally appeared before me the above-named Barely In Business, proved to me through satisfactory evidence of identification, which were ________________________, who being duly sworn did say that he is the President of Pick-up Truck with Two Magnetic Signs, Inc., that the foregoing Notice of Identification was signed on behalf of said corporation by authority of its board of directors, and that said instrument was acknowledged to be the free act and deed of Pick- up Truck with Two Magnetic Signs, Inc. and of himself and that the statements contained herein are true.
Then personally appeared before me the above-named Barely In Business, proved to me through satisfactory evidence of identification, which were ________________________, to be the person whose name is signed on the preceding or attached document and acknowledged to me that he/she signed it voluntarily for its stated purpose and in my presence and that the foregoing Notice of Contract was signed on behalf of said corporation by authority of its board of directors, and that said instrument was acknowledged to be the free act and deed of Pick- up Truck with Two Magnetic Signs, Inc. and of himself and that the statements contained herein are true.
RETURN ADDRESS: Attorney Jonathan Sauer, 15 Adrienne Road, East Walpole, MA 02032 (Telephone 508-668-6020)
PAGE TWO OF TWO - PICK UP TRUCK WITH TWO MAGNETIC SIGNS, INC. NOTICE OF CONTRACT
Then personally appeared before me the above-named Barely In Business, proved to me through satisfactory evidence of identification, which were ________________________, to be the person whose name is signed on the preceding or attached document, who being duly sworn did say that he is the President of Pick-up Truck with Two Magnetic Signs, Inc., that the foregoing Statement of Account was signed on behalf of said corporation by authority of its board of directors, and that said instrument was acknowledged to be the free act and deed of Pick- up Truck with Two Magnetic Signs, Inc. and of himself and that the statements contained herein are true.
PAGE TWO OF TWO - PICK UP TRUCK WITH TWO MAGNETIC SIGNS, INC. STATEMENT OF ACCOUNT
Notice of Contract filing: Norfolk Registry Book 27043, Page 158, June, 6, 2005
Statement of Account filing: Norfolk Registry Book 27659, Page 184, September 17, 2005
County of Essex Date: October 31, 2005
Then personally appeared before me the above-named Barely In Business, proved to me through satisfactory evidence of identification, which were ________________________, who being duly sworn did say that he is the President of Pick-up Truck with Two Magnetic Signs, Inc., that the foregoing Dissolution of Lien was signed on behalf of said corporation by authority of its board of directors, and that said instrument was acknowledged to be the free act and deed of Pick- up Truck with Two Magnetic Signs, Inc. and of himself and that the statements contained herein are true.
Please note that these materials are not intended as being legal advice but only as background materials for general educational purposes. For any legal problem you have, consult with counsel of your own choosing.