Protect Your Fees with a Mechanic's Lien

By: Laurence Richmond, Construction Attorney, Richmonds & Co. LLC, Wellesley, MA

As of July 1, 2011, Massachusetts Licensed Site Professionals (LSPs) can encumber real property with mechanic's liens to protect their hard-earned fees. A recent overhaul of the Massachusetts Mechanic's Lien Statute, General Law Chapter 254 (click here to view), finally secured for LSPs and other design professionals statutory protections that have long been enjoyed by contractors and their suppliers. With Governor Deval Patrick's signing of the amendments, the Commonwealth of Massachusetts joins other forward-thinking states granting design professionals broad Mechanic's Lien rights. Background information on this change in the law can be found in the March 2011 LSP Association Newsletter.          

Before the recent statutory revisions, Mechanic's Liens for planning and design work were prohibited by the strict language of the statute. Now, per M.G.L.A 254 § 2A, LSPs may encumber property to recover fees for services that are customarily and legally performed by or under the supervision or responsible control of an LSP in the course of his or her professional practice, including without limitation programming, planning, surveying, site investigation, analysis, assessment, design, preparation of drawings and specifications, and construction administration services. While LSPs often render professional services that do not require an LSP License, Chapter 254 as amended, on its face, is silent as to whether only bills for services that require an LSP license may be the basis for an encumbrance. One thing is for certain, however: the Mechanic's Lien statute is interpreted strictly by the Courts according to what is written, and there is no deviation from the letter of the law. There are numerous cases where even the slightest minor technical deviation from the strict language of the statute resulted in dissolution of the lien; the writer knows of at least one instance where a lien was dissolved because a document was sent to the Court by FEDEX as opposed to green card/certified mail as the statute required in the particular instance. As case law develops under the recent amendments, property owners, sureties, and general contractors will certainly challenge LSP liens applying a number of creative theories. However, Courts will be required to go by the "letter of law" and, on the face of the statute, the requirement of an LSP license appears to be a determining factor only with respect to the issue of "who" can file a lien, not on the issue of what type of services may be the grounds for a lien. M.G.L.A. 254 § 2A. 

Access to the protections afforded LSPs by the recent amendments to the Mechanic's Lien Statute requires that the LSP be properly authorized under the laws of the Commonwealth to practice or hold himself/herself out as a LSP. Certainly this requires that an LSP have a valid license. However, good practice would also be to make sure that the LSP's company has all of its filings up to date at the Secretary of the Commonwealth's Corporations Division (including but not limited to all annual reports). While the statute does not appear to require that these corporate filings be up to date, it is possible that any failure to have up-to-date corporate filings could be a basis for legal challenge to the lien, with unknown results as the law in this area evolves. Assuming the LSP is properly licensed and his or her company is properly registered with the Commonwealth, LSPs can now do the following to protect their design and planning accounts receivable: 

  1. Record a Mechanic's Lien on property where the LSP has a direct contract with the owner; 
  2. Record a Mechanic's Lien on property where the LSP is a sub-contractor to another design professional, provided that the retention of the LSP has been approved in writing by the owner; and 
  3. Record a Mechanic's Lien on property where the LSP is a sub-contractor to another sub-contractor on the project in question. In this instance, the statute requires under certain circumstances that the LSP provide a specific form of written notice to the General Contractor on the project, advising the General Contractor of the LSP's sub-contract. This statutory notice is called a "Notice of Identification," and must be delivered to the General Contractor within thirty (30) days of the LSP entering into contract with its customer or providing services or materials. Failure to provide a Notice of Identification can dramatically diminish the monetary value of the LSP's Mechanic's Lien. 

An LSP must take the following precautions at the onset of any project or risk waiver of his or her rights under the Mechanic's Lien Statute:

  1. Always have a written contract with a customer, because a written contract is required by the Mechanic's Lien Statute in order to assert a lien. What exactly constitutes a written contract for the purpose of satisfying the statute is a mixed question of law and fact that courts often struggle with, resulting in a wide array of rulings on the issue. LSPs should have an attorney review their contract documents to make sure they satisfy the requirements of the Mechanic's Lien Statute.  
  2. Always confirm with the customer the exact name of the property owner and double- check the information at the Registry of Deeds. Many properties are owned by corporate entities such as limited liability companies, and failure to properly name the owner in a recorded document can void the Mechanic's Lien.  
  3. Always verify whether the individual or entity the LSP believes to be the owner is the owner or a tenant. If the LSP's written contract is with a tenant, or with an individual or entity that has a contract with a tenant, the LSP's ability to encumber the property will be limited to being able to place a Mechanic's Lien on the leasehold (the tenant's interest in the property) as opposed to the owner's interest. However, leases often contain a rent acceleration clause that puts the tenant in default if a Mechanic's Lien is placed on the owner's property. Mechanic's Liens or leaseholds can result in immediate payment of the creditor's invoice, once the landlord learns of the encumbrance. 
  4. Always remember to give written notice to the "owner" and General Contractor when the LSP is contracted by a third party to render services at a property and, if necessary, request the owner's written approval of the LSP's participation. If the putative "owner" is really a tenant, consult with a lawyer concerning whether the tenant's written permission is required in order to protect the LSP's rights under the Mechanic's Lien Statute. 
  5. Always keep a thorough project calendar and know the first and last day the LSP and the General Contractor (if applicable) rendered services at the property. The Mechanic's Lien Statute has strict deadlines for filing and recording lien documents that correspond directly to the dates of performance by various vendors on the project, including the LSP. 
  6. Notwithstanding any documents the LSP may be asked to sign in order to receive payment from its customer or the owner, always remember that "lien waivers" are unenforceable in Massachusetts. (One exception to this rule is that under certain circumstances a lien waiver may be requested and recorded as a means of subrogating the claim of the liening party to that of a bank financing a project.) 
  7. Public projects cannot be subject to a Mechanic's Lien. If the owner or tenant is a government entity or, in some instances, receives public funds (such as a federally subsidized housing project), there is probably a payment bond (posted by a General Contractor or someone else in the LSP's payment stream) against which the LSP may make demand. Also, many institutional property owners, large public companies, banks, colleges and universities also require payment and performance bonds. Before starting work, always remember to ask for a copy of any payment or performance bond that has been issued by the General Contractor or anyone else in your direct payment stream. 

Mechanic's Liens are creatures of statute and courts tasked with validating and interpreting Mechanic's Liens follow the law strictly as it is written. As noted above, even a minor technical deviation from the statutory requirements may void what otherwise would be a valid Mechanic's Lien. Common errors made by attorneys and others recording Mechanic's Liens that result in liens being voided include: 

  1. Improperly naming the property owner or the tenant in recorded documents;  
  2. Failing to give statutory notice of the liening party's participation in the process to the owner or General Contractor; and  
  3. Failing to file and record lien documents at the registry of deeds or in court within the statutory time frames. 

LSPs interested in protecting their accounts receivable with Mechanic's Liens are encouraged to engage the services of an experienced construction lawyer to verify that all of the LSP's contract documents satisfy the written contract requirements of the Mechanic's Lien Law, and thereafter to prepare all Mechanic's Lien documents so that the LSP is sure to comply with the strict letter of the law of the Mechanic's Lien Statute. 

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