A mechanic’s lien is a statutorily created lien against real property, the purpose of which is to secure a person’s right to payment for services rendered and materials and supplies who furnished labor, supplies and materials to the improvement of real estate. A mechanic’s lien is an involuntary lien that may be field without the consent of the owner or any judicial review. It thus differs from a mortgage which is granted by the owner of the real estate or an attachment that requires court approval. Accordingly, a mechanic’s lien can be a powerful tool for creditors which will allow them to put a cloud on the title of real estate where their work, material, or services were provided
Massachusetts provides lien rights to parties to secure payment of a sum owed by an owner of real estate. Once established, a mechanic’s lien operates like other statutory liens, including attachments, garage keepers’ liens or an encumbrance such as a mortgage, giving the holder of the lien the right to bring foreclosure proceedings to recover the amount owed by forcing a sale of the property.
Mechanic’s liens provide contractors, subcontractors and suppliers protection from the risk of nonpayment for the work they perform on a project. Massachusetts also affords a statutory lien for “design professionals” as described below. While mechanic’s liens provide this benefit, strict adherence to the procedural requirements for establishing a lien is required. Failure to follow that process invalidates the lien. As a creature of statute, mechanic’s lien laws differ considerably from state to state. The following is an overview of the requirements under Massachusetts law.
The Massachusetts mechanic’s lien law is set forth in M.G.L. Chapter 254. The most common liens are under Sections 1 (personal labor), 2 (contractor) and 4 (subcontractors). They are described below.
Chapter 254, Section 1 – Personal Labor
A Section 1 lien is a lien to person for personal labor performed in the erection, alteration, repair or removal of a building or structure or improvement or alteration to real property. The lien does not require a written contract with the owner. The lien arises by virtue of an agreement with, or by consent of, the owner of the building or structure, or from a person having authority for the owner. The lien limits the amount of recovery to not more than thirty days’ work actually performed. The labor must have been performed within ninety days prior to the filing of a statement as provided in section eight of Chapter 254.
Chapter 254, Section 2 – Contractor Lien
A Section 2 lien arises when a person or entity enters into a written contract with the owner of real property, or with any person acting for, on behalf of, or with the consent of such owner for the whole or part of the erection, alteration, repair or removal of a building, structure, or other improvement to real property, or for furnishing material or rental equipment, appliances, or tools therefor, shall have a lien upon such real property, land, building, structure or improvement owned by the party with whom or on behalf of whom the contract was entered into, 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, to secure the payment of all labor, including construction management and general contractor services, and material or rental equipment, appliances, or tools which shall be furnished by virtue of said contract.
The notice must be filed or recorded in the registry of deeds in the county or registry district where the land lies by the person entitled to the lien. The statute contains a form notice referred to as a notice of contract.
Under Section 2C, lien rights also extend to Design Professionals who provide “professional services” relating to the proposed or actual erection, alteration, repair or removal of a building, structure, or other improvement to real property. Section 2A defines a Design Professional as “an architect, landscape architect, professional engineer, licensed site professional or land surveyor licensed or registered in the commonwealth, and any corporation, partnership, limited liability company, or other legal entity that is authorized under the laws of the commonwealth to practice or hold itself out as practicing any of the foregoing professions.” Section 2A defines ”Professional services” as “…services that are customarily and legally performed by or under the supervision or responsible control of design professionals in the course of their professional practice, including without limitation, programming, planning, surveying, site investigation, analysis, assessment, design, preparation of drawings and specifications and construction administration services.”
Section 2D sets forth the statutory form notice for a Design Professional under a written subcontract providing professional services to real property.
Regardless of form, all liens attach upon the real property, land, building, structure or improvement owned by the party with whom or on behalf of whom the contract was entered into on the date when a notice of contract is filed or recorded in the registry of deeds. The lien secures payment of all labor, including construction management and general contractor services, and material or rental equipment, appliances, or tools which shall be furnished by virtue of the contract. A section 2 lien is often referred to as a contractor’s lien since the lien arises from a written contract with the owner as opposed to a subcontractor hired by a contractor to perform only a portion of the work.
A Section 2 lien begins by recording a notice of contract in the registry of deeds. The notice must be recorded with the appropriate registry of deeds not later than the earliest of:
- 60 days from the recording by the owner and contractor of the notice of substantial completion under Section 2A;
- 90 days from the recording by the owner of a notice of termination under Section 2B; or
- 90 days after the last furnishing of labor and materials.
Chapter 254, Section 4 – Subcontractor Liens and Notice of Identification
A Section 4 lien allows for a person or entity who furnishes labor, including subcontractor construction management services, or who furnishes material, or both labor and material, or furnishes rental equipment, appliances or tools, or who performs professional services, under a written contract with a contractor, or with a subcontractor of such contractor to establish a lien on the date when a notice of contract is filed or recorded in the registry of deeds. Like the Section 2 lien, there is a statutory form, which the subcontractor must file or record in the applicable registry of deeds within the deadlines as for a Section 2 lien, as listed above.
If the person claiming a lien under Section 4 has no direct contractual relationship with the original contractor (i.e., sub-subcontractor), except for liens for labor under Section 1, the amount of the lien shall not exceed the amount due or to become due under the subcontract between the original contractor and the subcontractor whose work includes the work of the person claiming the lien as of the date such person files his notice of contract, unless the person claiming such lien has, within thirty days of commencement of the work, given written notice of identification by certified mail return receipt requested to the original contractor in substantially the form set forth in Section 4. Thus, a sub-subcontractor not recording or filing a notice of identification within thirty days of the commencement of work may lose the ability to lien for the full amount due as the amount is limited to the amount then due under the contract between the contractor (i.e., the general contractor) and the subcontractor. Thus, lower-tier parties performing portions of the work need to evaluate whether to file a notice of identification prior to starting performance.
Section 8 – Statement of Amount Due
Following the recording of the notice of contract under Section 2 or 4, the contractor or subcontractor must file a statement of account under section 8. The statement of account sets forth the amount due or to become due. It must be recorded at the applicable registry of deeds not later than the earliest of:
- 90 days after recording by the owner of a notice of substantial completion;
- 120 days after the recording of a notice of termination; or
- 120 days after the last furnishing of labor and materials.
Within 90 days of recording the statement of account, a lawsuit must be filed against the property owner to enforce the lien. If suit is not timely filed, the lien is automatically dissolved. An attested copy of the complaint (lawsuit) must then be recorded at the registry within 30 days of filing the complaint. The complaint must state that the lien claimant (plaintiff) seeks to establish a lien upon the property and, if successful and payment is not made on a judgment, to compel a sale of the property to satisfy the lien.
Section 2A – Notice of Substantial Completion of Work
Section 2A provides that upon or after substantial completion of any contract subject to the provisions of section two, the owner and contractor shall execute and file or record in the appropriate registry of deeds a notice of substantial completion in substantially in the statutory form. “Substantial Completion” is defined as the completion of work under the written contract so that it can be occupied or utilized for its intended use. The statutory notice requires that the contractor confirms that written notice of the recording or filing of the notice of substantial completion has been served upon every person who has entered into a written contract directly with the contractor or who has given written notice of identification to the contractor prior to the date the notice of substantial completion is filed or recorded as provided in Section 4.
While notice of substantial completion is advisable, it may be difficult to have the contractor and owner signing the notice if the parties are in disagreement over completion or there are other claims unresolved between the parties.
Section 2B – Notice of Termination
If, prior to the filing or recording in the registry of deeds and delivery of the copies of the notice of substantial completion described in section two A, any contract subject to the provisions of section two shall have been terminated, the owner shall execute and file or record in the appropriate registry of deeds a notice of termination substantially following the statutory form.
By filing the notice of termination the owner confirms having served written notice of the recording or filing of the notice of termination upon the contractor and every person who has filed or recorded a notice of contract under Section 4. Service of the notice is by certified mail return receipt requested. Upon the contractor’s receipt of a notice of termination, the contractor must deliver a copy to every person who has entered into a written contract with the contractor or who has given to the contractor written notice of identification in accordance with Section 4.
No Lien Rights on Public Property
Under Section 6, no lien shall attach to any land, building or structure owned by the commonwealth, or by a county, city, town, water or fire district. Thus, it is particularly important for subcontractors to inform the applicable governmental authority regarding timely payment from a contractor.
Dissolution of Lien
Under Section 10, a lien may be dissolved by a notice signed by the lienor, stating that lien is dissolved, recorded in the registry of deeds where the notice of the contract was recorded.
In addition, under Section 14, a lien may be dissolved by recording in the registry of deeds in the county or district where the land lies, a bond of a surety company authorized to do business in Massachusetts and in a penal sum equal to the amount of the lien. Upon recording of the bond, the lien is dissolved. Notice of the recording shall be given to the claimant by serving on the claimant a copy of the notice of recording together with a copy of the bond by an officer qualified to serve civil process or by delivering to the claimant. The filing of the bond shall not create any rights which the claimant would not have had, or impair any defense to an action to enforce a lien.
And under Section 15, if a court finds that no person is entitled to a lien, or that every lien has been discharged by payment thereof, judgment shall enter to that the lien is dissolved, and a certificate to that effect shall be recorded at the applicable registry of deeds.
Section 32: Void and unenforceable covenants, promises, etc.
The Massachusetts statute vids as against public policy any covenant, promise, agreement in any contract or agreement relative to the construction, alteration, repair or maintenance of a building, including moving, demolition, professional services and excavating connected therewith, that seeks to bar the filing of a notice of contract, seeking to enforce a lien or purporting to subordinate such rights to the rights of other persons. There are certain exceptions, however, including: (1) waivers of liens given by any person named as a principal on a lien bond provided under section twelve in connection with an interim or final payment received by such persons; (2) statements by persons entitled to file documents under this chapter of amounts due or paid to them; (3) dissolutions of liens under section ten; and (4) partial waivers and subordinations of liens given by persons who have filed or recorded notices of contract under section two substantially in the statutory form with no material deviation therefrom.
So how can an owner provide protection from a mechanic’s lien? Having a well drafted written contract with a clear scope of work and specific timelines or milestones governing payments. In addition, no payment should be made without obtaining partial lien waivers from those entitled to lien under the statute. At the conclusion of the project, the owner should secure final payment lien waivers from all parties to establish that all amounts due have been paid and all parties have waived the right to lien the real property.
For contractors and subcontractors, particularly in Massachusetts, it is critical to follow the statute as failure to comply with the statutory time limitations will result in dissolution of the lien. Numerous court decisions have invalidated notices of contracts on procedural grounds, such as late recording, improper notice, purchase orders not representing a written contract and other technical grounds. If in doubt, seek competent counsel.