Lean on professional advice, avoid a lien on your property

If you are hiring a contractor, you should know that he will have some unusual rights against you if something goes awry with the project.

Workers who devote labor and/or materials into construction projects are given “lien” (pronounced “lean”) rights against the property in the event they are not paid by the party who has promised to pay them.

The reason we have mechanics’ liens is to prevent the owner of the property from being “unjustly enriched” when that property owner has not paid for the work performed.

The owner’s perspective

An owner not familiar with the construction process could end up paying for the same work twice.

What happens when the owner pays the general contractor for the work, but the general contractor fails to pay its subcontractors? Can those people who are owed money come after the owner?

In Massachusetts, the answer is yes, but the amount of the lien is limited to the amount due or to an amount that may become due to the general contractor from the owner after the owner receives notice from the unpaid party.

If the owner pays the general contractor after receipt of a notice of lien, the property owner could still be liable to the unpaid lien holder and could end up paying for the same work twice.

The good news is that an owner can do something about the situation. One remedy is for the owner to cut joint checks so that both the general contractor and the subcontractor and/or material supplier get paid at the same time. This arrangement requires both workers to sign the check before it is cashed.

The contractor’s perspective

Generally, contractors must assert their mechanics’ lien rights within a specified time frame.

In Massachusetts, lien rights can expire in as few as 90 days after the date a contractor last worked on the project and, in some instances, in as few as 60 days if certain procedural steps are not followed.

If you are a contractor in this scenario, chances are you are not the only contractor who has filed a mechanics’ lien on the project.

Most troubled projects have multiple liens filed against the property by the various participants in the construction process (for example, lenders, architects, contractors, material suppliers and others).

Generally, whoever filed first stands at the head of the line to get paid first.

Proactive versus reactive

Mechanics’ liens are very complex, and failure to follow your state’s laws exactly could result in your lien being dissolved. Additionally, there are exceptions, and not all work that would be considered part of the construction process can qualify for a lien.

Whether you are an owner or a contractor, you should consult with an attorney familiar with the state’s mechanics’ lien law to fully understand your rights and obligations, so when the stampede of lien claimants begins, you can be proactive instead of reactive.

— Steven R. Striffler
Steven R. Striffler is a construction lawyer in Boston. He can be contacted at steve@strifflerlaw.com.