Massachusetts Law Review

Case & Statute Comments

Mechanic's Lien Law: More Clarity from the Supreme Judicial Court

Tremont Tower Condominium LLC v. George B.H. Macomber Co., 436 Mass. 677 (2002)

The Massachusetts Mechanic's Lien Law1 substantially impacts all commercial and residential real estate construction activity in Massachusetts. The mechanic's lien law was enacted to ensure that those who furnish labor and/or materials for construction activity are paid by providing such laborers and materialmen a statutory lien on real property.2 Because mechanic's lien laws are creatures of statute, mechanic's lien procedures vary from state to state. The consequence of a mechanic's lien in Massachusetts is broad: the lien holder has the right to recover the debt owed by instituting foreclosure proceedings and forcing a sale of the real estate. The main parties involved in a mechanic's lien are the person or entity with a real property interest in the premises (owner, tenant or lender) and the person or entity furnishing labor and/or materials (the general contractor, the subcontractor, the supplier or the laborer).

The relationship between those parties with an interest in the real property and those parties furnishing labor and/or materials is determined by the contract or series of contracts entered into to accomplish the construction project. Such a relationship between the parties gives rise to a mechanic's lien, and the successful enforcement of a mechanic's lien involves litigation. Since a mechanic's lien can have broad consequences on the real estate, the mere existence of a mechanic's lien can be a powerful negotiating tool to resolve differences between the parties without resorting to litigation.

Over the course of years, various aspects of the Massachusetts mechanic's lien law have been revisited by the state legislature or interpreted by the state courts. Recently, the Massachusetts Supreme Judicial Court provided clarity with respect to when the right to a mechanic's lien arises. In Tremont Tower Condominium LLC v. George B.H. Macomber Co.,3 the Supreme Judicial Court held that in a case of a direct contract with the owner, the voluntary dissolution of a mechanic's lien by a general contractor4 did not prevent that general contractor from later recording another timely notice of contract.5 The previous confusion faced by mechanic's lien practitioners may have derived from the inchoate aspects of the mechanic's lien.6 In this case, the Supreme Judicial Court took a literal interpretation of the language of the mechanic's lien law to hold that: a) the statutory right to a mechanic's lien by a contractor arose at the time of entering into a written contract;7 b) the lien itself arose after the contractor asserted that right by recording a notice of contract;8 c) the act of recording established the priority of the lien;9 d) the lien was not perfected until all of the applicable statutory requirements, including deadlines, were met;10 e) a voluntary dissolution of the lien was not a permanent bar to the right to assert the lien with another notice of contract so long as the deadlines had not passed (the contractor merely lost the priority established of record in the first notice of contract);11 and f) the passing of any single deadline in claiming, perfecting or enforcing the lien was a fatal error to enforcing the lien (i.e., an automatic dissolution of the lien).12

In its decision, the Supreme Judicial Court comprehensively reviewed the intent and purpose behind the mechanic's lien law, which was revised extensively in 1996.13 Under the old law, the Supreme Judicial Court acknowledged that strict compliance with the procedural requirements to establish and enforce a mechanic's lien created more problems than it solved.14 Strict compliance required the contractor to file a notice of contract by the (often unrealistic) completion date set forth in the original construction contract to avoid permanently losing the right to assert a mechanic's lien, in spite of the fact that the actual completion date of the work often occurred far beyond the date identified in the construction contract. Consequently, this encumbered the owner's title, even though there may not have been a dispute with the contractor, and usually resulted in suspension of construction financing.15 The court determined that the legislature addressed this problem by "specifying that the contractor could file the notice [of contract] 'at any time' prior to [the stated] deadlines."16 In support of this interpretation, the defendant general contractor, Macomber, pointed out the common industry practice of a contractor dissolving a lien to clear title so that construction funding could have priority over a mechanic's lien and then reasserting the lien at a later date, within the applicable deadlines. The court determined that the legislature never intended to prohibit this practice.17

In fact, just prior to deciding Tremont Tower, the Supreme Judicial Court had affirmed the importance of observing the deadlines to create and enforce a mechanic's lien. In Ng Brothers Construction Inc. v. Cranney,18 the Supreme Judicial Court held that filing a notice of substantial completion was not a condition precedent to recording a valid and enforceable notice of contract and statement of account because the filing of a notice of substantial completion "[was] only one of three possible options for calculating the deadline for filing a notice under the statute."19 Ultimately, the Supreme Judicial Court determined that no lien was created because the general contractor failed to demonstrate, for summary judgment purposes, that it complied with any of the three possible methods.20 In Tremont Tower, fully consonant with its prior cases, the Supreme Judicial Court concluded that so long as the underlying right to assert the mechanic's lien within the applicable deadline had not expired, a contractor may dissolve a pre-existing lien and re-file a notice of contract to assert a new lien. As the court specifically noted, Tremont Tower was entirely consistent with its holdings in Mullen Lumber Co. v. Lore21 and Blount Brothers Corp. v. Lafayette Place Associates22 where it also required strict compliance with the deadlines.23

Thus, the purpose and intent of the current mechanic's lien law remains the same as when it was first adopted in the early 19th century: "'to provide security to contractors, subcontractors, laborers, and suppliers for the value of their services and goods provided for improving the owner's real estate. . . . At the same time, the statute contains filing and notice requirements to protect the owner and others with an interest in the property.'"24 With its decision in Tremont Tower, the Supreme Judicial Court has provided a clearer road map for the life cycle of a mechanic's lien, as summarized here:

Right to mechanic's lien: The right to a mechanic's lien arises at the time the general contractor and the owner enter into a written contract.25 The Supreme Judicial Court determined, based on the legislative evidence the lien is not created until a subsequent action is taken by the general contractor to assert it, that the general contractor's underlying right to assert a mechanic's lien is not extinguished until the expiration of statutory requirements, including deadlines.26

Claiming a mechanic's lien: The general contractor must timely record or file (in the case of registered land) a notice of contract in the registry of deeds for the county in which the property is located in order to assert its statutory right to a mechanic's lien. The lien is created at the time of such recording.27 The court supported its conclusion both by citing to various provisions in the mechanic's lien law and evaluating legislative intent.28 The notice of contract must be recorded within a specific period of time, beginning "at any time after execution of the written contract" and ending at the earliest of one of three points in time calculated in relation to the manner the contract was either terminated or completed:29 1) within 60 days after the filing of a notice of substantial completion;30 2) within 90 days after the filing of a notice of termination;31 or 3) within 90 days after the contractor last performed or furnished labor and/or materials.32

Priority of a mechanic's lien: Upon recording in the registry of deeds the notice of contract by the general contractor, that recording date and time sets the priority of the mechanic's lien with respect to other liens or encumbrances recorded later.33

Perfecting and enforcing a mechanic's lien: The perfection and enforcement of the mechanic's lien requires three additional steps, which must be performed within time frames established by the statute: 1) the general contractor recording in the registry of deeds a statement of account within the applicable deadline;34 2) the general contractor commencing a civil action in superior or district court; and 3) the general contractor recording in the registry of deeds an attested copy of the civil action complaint.35

Dissolving a mechanic's lien: There are both automatic (involuntary) and voluntary methods for dissolving a mechanic's lien. The automatic methods can be traps for the unwary if not carefully monitored and include the general contractor's failure to meet any of the deadlines for claiming, perfecting and enforcing a mechanic's lien.36 The voluntary method is accomplished by the general contractor's recording a notice of dissolution in the registry of deeds.37

Conclusion

In Tremont Tower, the Supreme Judicial Court confirmed that the language of the mechanic's lien statute provides adequate guidance for imposing strict statutory compliance on contractors to claim, perfect and enforce a lien. In response to statutory silence regarding precisely when the right to a mechanic's lien arises, the Tremont Tower case now provides the missing clarity. To anyone dealing with disputes involving a mechanic's lien, the procedural implications of Tremont Tower are a welcome clarification as to when the contractor's rights to such a lien arise and the strict compliance requirements to make use of such a right. It is clear that a contractor may voluntarily dissolve a mechanic's lien and still claim a mechanic's lien by filing another notice of contract so long as all procedural requirements, especially deadlines, are met. Using the same reasoning from Tremont Tower, it appears that procedural matters other than the refiling of a notice of contract, such as amending a statement of account or subordinating a subcontractor's mechanic's lien, should be possible so long as the statutory requirements, including deadlines, are met.

A number of aspects of the law governing disputes that arise from mechanic's liens, however, remain unclear. For instance, some matters yet to be addressed by the Supreme Judicial Court are the apparent cap on a subcontractor's mechanic's lien according to what the general contractor is "due or about to be due" when the general contractor has been terminated, as well as mortgagee rights to withhold funding for defaults other than a mechanic's lien procedural filing. Both owners in realty development projects and parties furnishing labor and/or materials await further decisions by the Supreme Judicial Court to clarify other aspects of the mechanic's lien law.


R. Paul Faxon

Joyce Anagnos

1. See Mass. Gen. Laws ch. 254.[back]

2. Hammill-McCormick Assoc., Inc. v. New England Tel. & Tel. Co., 399 Mass. 541, 542-43 (1987).[back]

3. 436 Mass. 677 (2002).[back]

4. While Tremont Tower involved a general contractor with a direct contract with the property owner pursuant to General Laws chapter 254, section 2, mechanic's liens also may be sought, subject to various statutory requirements, where: (a) personal labor is provided by an individual or an agent or assignee of an individual, see Mass. Gen. Laws ch. 254, ß 1; (b) a subcontractor has a direct contract with a general contractor who has a direct contract with the property owner, see Mass. Gen. Laws ch. 254, ß 4; or (c) a subcontractor has a direct contract with another subcontractor, see Mass. Gen. Laws ch. 254, ß 4. As an example of the varying statutory requirements, a direct laborer need not have a written contract with either the general contractor or the owner in order to claim a mechanic's lien; therefore, there is no procedural requirement to file a notice of contract. Mass. Gen. Laws ch. 254, ß 1.[back]

5. Tremont Tower, 436 Mass. at 683.[back]

6. See id. at 683. As the SJC noted,

[A]lthough there is no express articulation in the statute concerning the precise moment at which a lien under [General Laws chapter 254] ß 2 comes into being, the terms of the statute appear to presuppose that the lien is created by the filing of the notice and that no lien exists prior to such filing. As such, what is dissolved by voluntary notice of dissolution is whatever lien was created by the prior filing of a notice of contract. The notice of dissolution does not take away the contractor's underlying right to assert a lien, assuming that all statutory requirements, including all deadlines, are still met.[back]

7. See Mass. Gen. Laws ch. 254, ß 2A (". . . any written contract enforceable under the laws of the commonwealth.").[back]

8. See Mass. Gen. Laws ch. 254, ß 2 ("A person entering into a written contract with the owner of any interest in real property . . . shall have a lien upon such real property . . . as appears of record on the date when notice of said contract is filed or recorded in the registry of deeds for the county or district where such land lies. . . ."); see also Mass. Gen. Laws ch. 254, ß 4 ("Whoever furnishes labor . . . under a written contract with a contractor . . . may file or record in the registry of deeds for the county or district where such land lies a notice of his contract . . . .").[back]

9. See Tremont Tower, 436 Mass. at 680 ("The recording of the notice of contract establishes the priority of the Mechanic's lien. As a general matter, the lien takes priority over all other later-recorded encumbrances on the property. Thus, once filed, the notice of contract sets the date for the lien's priority.").[back]

10. Mass. Gen. Laws ch. 254, ßß 1, 2, 4, 5, 8, 11.[back]

11. Mass. Gen. Laws ch. 254, ß 10.[back]

12. See Mass. Gen. Laws ch. 254, ß 8 ("Liens under [ßß 2 and 4] shall be dissolved unless the contractor, subcontractor, or some person claiming by, through or under them, shall, not later than the earliest of: (i) [90] days after the filing or recording of the notice of substantial completion under [ß 2A]; (ii) [120] days after the filing or recording of the notice of termination under [ß 2B]; or (iii) [120] days after the last day a person, entitled to enforce a lien under [ß 2] or anyone claiming by, through or under him, performed or furnished labor or material or both labor and materials or furnished rental equipment, appliances or tools, file or record in the registry of deeds in the county or district where the land lies a statement, giving a just and true account of the amount due or to become due him, with all just credits, a brief description of the property, and the names of the owners set forth in the notice of contract. . . Nothing in this section shall prohibit the filing or recording of a statement under this section prior to the filing or recording of the notices under [ß 2A or 2B].").[back]

13. See St. 1996, c. 364.[back]

14. Tremont Tower, 436 Mass. at 685.[back]

15. Id.; see Blount Bros. Corp. v. Lafayette Place Assoc., 399 Mass. 632, 637 (1987) (no valid lien created where notice of contract did not state contract completion date).[back]

16. Tremont Tower, 436 Mass. at 686 ("It is preferable, for all concerned, that interim resolution of such disputes allow for removal of the lien. . . . Macomber's proposed literal interpretation of the 'at any time' language in [General Laws chapter 254 ß 2] is in keeping with the apparent intent to remove some of the traps, barriers, and needless wrangling associated with former mechanic's lien practices."). See Mass. Gen. Laws ch. 254, ß 2.[back]

17. Tremont Tower, 436 Mass. at 686-88. Specifically, the Supreme Judicial Court noted:

Here, there is no reason to believe that, in revising the mechanic's lien statute, the Legislature intended to eliminate this practice. Indeed, the Legislature left in place the statute's prohibition on contract provisions barring the filing of a notice of contract of the enforcement of liens, or purporting to subordinate those liens, but included in the list of exceptions to that prohibition "dissolutions of liens under [ß10]." G.L. c. 254, ß 32(3). This suggests that the Legislature did not intend to change it. Rather, while owners could not categorically require contractors to forgo or subordinate their lien rights, the Legislature left in place the use of notices of dissolution over the course of such contracts. We see no reason to read into the statute a prohibition on the refiling of a notice of contract after an earlier notice has been voluntarily dissolved.[back]

18. 436 Mass. 638 (2002).[back]

19. Id. at 643.[back]

20. Id. at 648-49.[back]

21. 404 Mass. 750 (1989). In Mullen, the Supreme Judicial Court determined that a mechanic's lien was involuntarily dissolved when a subcontractor, who entered into a written contract with a general contractor and recorded both a notice of contract and a statement of account within the required deadlines, took no further action to perfect and enforce the lien by commencing a civil action or recording an attested copy of the complaint. The subcontractor's attempt to extend the deadline for enforcing the lien by re-recording the statement of account over two months later could not prevent the dissolution. As the court noted, "[t]here can be but one lien for the materials supplied and the filing of a second statement of account concerning the same materials neither extends the statutory period nor revives the lien if the statutory period has passed." Id. at 756.[back]

22. 399 Mass. 632 (1987). The Supreme Judicial Court held in Blount Brothers Corp. that a valid mechanic's lien was not established where a general contractor entered into a written contract with an owner/developer and recorded a notice of contract citing a reasonable estimate of when the work would finish instead of the completion date set forth in the written contract. Its decision rested on the fact that the notice did not strictly comply with the requirement, under General Laws chapter 254, section 2, that it recite the contract completion date, even though conforming to the statute's requirements would likely result in the owner/developer's lender halting payment to the general contractor under the "no lien provisions" of that contractual relationship.[back]

23. See Tremont Tower, 436 Mass. at 684 ("These cases stand for the proposition that strict compliance with the requirements of the statute are required in order to create and enforce a mechanic's lien. That a contractor cannot refile for a lien after a critical deadline has lapsed does not mean that a lien voluntarily dissolved prior to the expiration of any relevant time period permanently precludes the contractor from creating and enforcing a lien.").[back]

24. Id. at 679 (citing Hammill-McCormick Assoc., Inc. v. New England Tel. & Tel. Co., 399 Mass. at 542-43).[back]

25. Id. at 679-80 (citing Mass. Gen. Laws ch. 254, ß 2) (A subcontractor who wishes to assert its right to a mechanic's lien must enter into a written contract with the general contractor, regardless of whether the general contractor has a written contract with the owner.); see Mass. Gen. Laws ch. 254, ß 4. A written contract is not required, however, when an individual provides personal labor, pursuant to General Laws chapter 254, section 1.[back]

26. Tremont Tower, 436 Mass. at 680-83.[back]

27. See id. at 682 ("It does not appear that any form of 'lien' actually exists prior to recording a notice of contract. The contractor has a statutory right to such a lien, but the lien itself does not exist until the contractor does something to assert that right.").[back]

28. Id. at 682-83.[back]

29. Id. at 680 (citing Mass. Gen. Laws ch. 254, ß 2).[back]

30. Id. at 680; see Mass. Gen. Laws ch. 254, ß 2A ("If the parties to the contract have filed a notice of substantial completion (signifying the parties' agreement that the 'work under the written contract is sufficiently complete so that it can be occupied or utilized for its intended use'), the contractor must file the notice of contract no later than sixty days after the filing of the notice of substantial completion."); see also Mass. Gen. Laws ch. 254, ß 2 ("substantial completion, [is] work under the written contract [that] is sufficiently complete so that it can be occupied or utilized for its intended use.").[back]

31. See Tremont Tower, 436 Mass. at 680 ("If the contract has been terminated and the owner has filed a notice of termination, the contractor must file the notice of contract no later than ninety days after the filing of the notice of termination"); see also Mass. Gen. Laws ch. 254, ßß 2 and 2B.[back]

32. Tremont Tower, 436 Mass. at 680; see Mass. Gen. Laws ch. 254, ß 2 ("Or, in the absence of any such notice of substantial completion or notice of termination, the deadline for filing a notice of contract is ninety days after the contractor 'last performed or furnished labor or materials or both labor and materials.'"). Unfortunately, because there often is disagreement between the parties as to what day the contractor "last performed or furnished labor or materials or both labor and materials," calculating the 90-day deadline can be difficult. Thus, the more objective the supporting evidence is as to such date, the more persuasive such evidence will be to the fact-finder. See Ng. Brothers Construction., 436 Mass. at 645-49 (general contractor's seemingly contradictory affidavits failed to overcome summary judgment in face of owners' documentary evidence).[back]

33. Tremont Towers, 436 Mass. at 680. This is true even if the contractor agrees to subordinate its rights to others, as its enforcement is deemed to be against public policy. General Laws chapter 254, section 32 contains four exceptions to this general rule: (1) a lien waiver given by the principal on a Section 12 lien bond for interim or final payment; (2) statements regarding amounts due or paid by persons entitled to file documents under the mechanic's lien law; (3) a Section 10 voluntary lien dissolution; or (4) partial waivers of Section 2 liens and subordination of lien rights in exchange for advances by secured lenders. Note that filing of such notice of contract is not required for a Section 1 lien for personal labor, leaving its priority to be determined, presumably, by its perfection requirements.[back]

34. See id. at 680-81 ("The contractor must record a statement of account, setting forth the amount due or to be come due. That statement of account must be filed within ninety days of the filing of a notice of substantial completion; within 120 days of the filing of a notice of termination or within 120 days after the contractor last performed or furnished labor, materials, equipment, appliances, or tools for the project, whichever is earliest."); see also Mass. Gen. Laws ch. 254, ß 8. A lien for personal labor is perfected by the filing of the statement of account for up to 30 days of labor in the last 90-day period. See Mass. Gen. Laws ch. 254, ß 1. Depending on the terms of the underlying contract between the owner and the general contractor, interest and attorneys' fees may be recovered for enforcing the mechanic's lien. National Lumber Co. v. LeFrancois Constr. Corp., et al., Mass. Law. Wkly. No. 13-087-02 (Mass. App. Div., Western Div., Dec. 31, 2002).[back]

35. Tremont Tower, 436 Mass. at 681; see Mass. Gen. Laws ch. 254, ß 5 ("A lien upon land for the . . . improvement of real property. . . shall be enforced by a civil action brought in the superior court for the county where such land lies or in the district court in the judicial district where such land lies. . . . An attested copy of the complaint, which shall contain a brief description of the property sufficient to identify it, and a statement of the amount due, shall be filed in the registry of deeds and recorded as provided in [ß 9] within [30] days of the commencement of the action, or such lien shall be dissolved."); see also Mass. Gen. Laws ch. 254, ß 11 ("The lien shall be dissolved unless a civil action to enforce it is commenced within [90] days after the filing of the statement required by [ß 8]."). A lien for personal labor is perfected by the individual filing in the registry of deeds a civil action in superior or district court within 90 days of filing the statement of account and recording an attested copy of the civil action complaint within 30 days of commencing the civil action.[back]

36. Tremont Towers, 436 Mass. at 681.[back]

37. Id. (citing Mass. Gen. Laws ch. 254, ß 10) ("'The lien of any person may, so far as his interest is concerned, be dissolved by a notice signed by him, stating that his lien is dissolved, filed in the registry of deeds where the notice of the contract is filed under which contract the lien is claimed.").[back]



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