From a contractor's perspective, there are many issues to consider in deciding whether to pursue a mechanic's lien. In this article we will discuss the procedures for recording and perfecting a mechanic's lien, and the issues a client contractor or subcontractor should analyze. The so called mechanic's lien statute is G.L. c. 254.
With the exception of a lien for personal labor, a mechanic's lien may only be filed for work, materials or services performed under a written and enforceable contract. Although a mechanic's lien may be enforced against a leasehold interest, for the purposes of this article we will discuss a lien against a fee simple owner. Other than a laborer's lien, all mechanic's lien claimants must file a notice of contract and a statement of account.
Notice of Contract
The lien attaches when the notice of contract is recorded at the registry of deeds in the county where the real property is located. Later procedures serve to perfect the lien. The requirements and format for a notice of contract are contained in G.L. c. 254 § 2 for contractors and §4 for subcontractors. For contractors, the notice of contract must be filed no later than the earliest of:
- 60 days after filing or recording a notice of substantial completion;
- 90 days after filing a notice of termination; or
- 90 days after the contractor or any subcontractor working under the contractor last performed work or furnished materials under the contract.
These requirements are identical for a subcontractor save for the last requirement:
- 90 days after the general contractor or anyone claiming by, through or under the general contractor performed or furnished labor and materials.
The deadlines outlined above ultimately rest on what the final day of performance under a certain project is. A subcontractor may work on a project early, and be unaware of the final day under the contract. It is therefore prudent and best practice to record the notice of contract as soon as practically possible after executing the contract. The owner of the real property must receive actual notice of the recording for it to be effective. The proper method of service is not specified in the statute.
Statement of Account
The statement of account serves to perfect the lien attached by the notice of contract, and can be found in Section 8. The statement is similarly recorded at the registry of deeds in the county where the real property is located. If the statement is not recorded within the time period specified, the lien automatically dissolves. It is possible for a claimant to file a notice of contract and statement of account at the same time if it falls within the applicable timelines. The timelines are identical for a general contractor or a subcontractor, and are not later than the earliest of:
- 90 days after the recording of the notice of substantial completion;
- 120 days after the recording of the notice of termination; or
- 120 days after the contractor or any subcontractor working through or under the contractor last performed work or furnished materials under the contract.
A subcontractor's lien is limited in that it can secure no more than the amount remaining due on the original contract at the time the subcontractor files his notice of contract. There is no such limitation for a general contractor. In fact, absent a perfected mechanic's lien, a subcontractor has no method of recovery against the homeowner within the confines of G.L. c. 254. In most such disputes, the homeowner will have already paid the general contractor monies earmarked for a subcontractor, leaving quasi contract remedies such as quantum meruit and unjust enrichment unavailable.
Enforcement and Dissolution
The claimant is required to file suit in the district or superior court of the county where the property is located within 90 days of the recording of the statement of account. Whether the damages are over or under $25,000 will determine if the claimant will file in district or superior court. The claimant has a similar duty to record an attested copy of the complaint with the registry of deeds no later than 90 days after the recording of the statement of account or 30 days after filing the complaint in court. If these deadlines are not met, the lien automatically dissolves by operation of law. Otherwise, the lien can be dissolved by recording a voluntary dissolution of mechanic's lien; an attested copy of the clerk's certificate indicating that the applicable litigation has been resolved; by judgment; or by recording a lien bond.
A homeowner will not be happy once they discover a mechanic's lien has been recorded and is in effect encumbering their real property. G.L. c. 142A, the so called Home Improvement Contractor Statute, is likely to be used by the homeowner as a countermeasure to any lien, as the statute contains a litany of requirements for a contract for home improvement services whereby the work being done is on the homeowner's primary residence. It is therefore crucial that a contractor who contracts directly with a homeowner to do work on the homeowner's primary residence has drafted and executes a contract in strict compliance with G.L. c. 142A § 2. In addition, the Massachusetts Prompt Pay Act (G.L. c. 149 § 29E) may provide additional remedies to those entities entitled to file a mechanic's lien if the original contract is for $3 million or more, and the project is on a commercial building or residential structure with four units or more.