Since Covid-19, Many More Mechanic’s Liens Filed

Since the outbreak of the COVID-19 pandemic, we have seen an increase in reliance on force majeure and other clauses in construction contracts due to delays caused by COVID-19, such as construction shutdowns and social distancing. This has caused construction projects to stop or slow, stopping or slowing payment, and has resulted in an increase in the filing of mechanic’s liens. The Massachusetts Mechanic’s Lien Law, General Law Chapter 234, outlines the procedure for a contractor, subcontractor, material person or design professional to enforce a statutory lien on real property for the payment of money owed on a project by an owner for labor or materials furnished for improvements to the property during the course of construction. Once established, a mechanic’s lien is of significant value, and gives the lienholder the right to foreclose on the property and recover the monies owed by forcing a sale of the property.

The Massachusetts Mechanic’s Lien Law is a strict compliance statute. This means that strict adherence to the procedural requirements to establish a lien is required, otherwise the lien is deemed invalid. Generally, the Mechanic’s Lien Law protects those who furnish labor or materials in connection with the erection, alteration, repair or removal of a building or structure, or improvement or alteration to real property pursuant to a written contract. Perfecting a mechanic’s lien is a four (4) step process in Massachusetts. A claimant must: (i) timely record a Notice of Contract (usually within ninety (90) days from the date the person claiming the lien last performed or furnished labor or materials, or both, to the job, unless a notice of substantial completion or notice of termination has been filed, in which case a shorter timeline may apply); (ii) timely record a Statement of Account; (iii) timely file a Complaint to enforce the mechanic’s lien within ninety days (90) after the filing of the Statement of Account; and (iv) record an attested copy of the complaint at the registry of deeds within thirty (30) days of filing.

While lien rights between a general contractor, who has a direct written contract with a property owner, and subcontractor, who has a direct written contract with a general contractor, but not the property owner, are similar, the case of Trace Construction, Inc. v. Dana Barros Sports Complex, LLC made an important distinction between their ability to lien the fee interest of real property. For a lien asserted by a general contractor or prime design professional, the mechanic’s lien attaches against any interest in real property owned by the party entering into the written contract. In addition, a general contractor’s lien attaches to the fee interest of a property owner who consents (beyond silent acquiescence) to a tenant’s contracting for work on the property. It is important that landlords understand this, as the Supreme Judicial Court has ruled that where a lease states that improvements to the property require consent of the landlord, not to be unreasonably withheld, and no objection to the construction is stated, a landlord can be deemed to have consented to the furnishment of labor or materials, or both. However, a subcontractor does not have such extensive rights. A subcontractor doing tenant “build out” work under a lease only has lien rights against the leasehold interest, not against the fee interest of the real property. This is an important distinction, as it severely limits the rights of a subcontractor seeking to enforce a lien against a tenant who has contracted for labor or materials on property it does not own.

Any person asserting mechanic’s lien rights should note that although most states have a mechanic’s lien law, the laws are not uniform. The substantive and procedural requirements between states often vary greatly. It is critical to engage competent legal counsel, well-versed in a state’s specific mechanic’s lien law, and to assert such rights in a timely manner in strict compliance with the statute.