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Know the Law: Holding Payment to a Contractor Following a Dispute

Written by: Steven J. Dutton

Published in the Union Leader (11/9/2020)

Q:  I hired a contractor to build an addition to my house.  We got into a dispute, and he walked off the job before completing the project.  Is the contractor still able to obtain a mechanic’s lien for amounts he claims are owed even though the work was never completed?

A:  Yes, it is likely that the contractor can obtain a mechanic’s lien on your property even though the contractor did not finish the project.  Fundamentally, if the property has been improved, and the contractor has not been paid in full for providing that improvement, there is a mechanic’s lien right that can be asserted by the contractor, although you may have competing claims arising from the failure to complete the work.

New Hampshire mechanic’s lien law is set forth by statute.  In general, any person who, by himself or with others, performs labor or furnishes materials to improve private real property may have mechanic’s lien rights.  A mechanic's lien is a statutory lien upon property to secure the payment of a sum owed by an owner of real estate to a general contractor, subcontractor, or supplier for labor and/or materials furnished to a project during the course of construction.  Once established, a mechanic's lien operates like any other statutory lien or mortgage, giving the holder of the mechanic’s lien the right to bring foreclosure proceedings and to recover the sum owed by forcing a sale of the property.  Mechanic’s liens are intended to provide contractors, subcontractors and suppliers protection from the risk that they might not get paid for the work they perform. 

A mechanic’s lien is created as soon as a contractor or supplier performs work, and provides value by way of improvements to the property.  Indeed, a contractor could file a mechanic’s lien before completion of the project, even if that contractor was still continuing its work.  This allows payment disputes to be dealt with as they arise.  For example, if a contractor is working on a year-long project but has a payment issue in the fourth month of the project, that contractor does not need to wait until the project is complete to address the payment issue.  Thus, a contractor likely can assert its right to a mechanic’s lien even if the work was not fully completed, so long as the contractor performed work that improved the property.

Steve can be reached at [email protected].

Know the Law is a bi-weekly column sponsored by McLane Middleton, Professional Association.  We invite your questions of business law.  Questions and ideas for future columns should be addressed to: McLane Middleton, 900 Elm Street, Manchester, NH 03101 or emailed to [email protected].  Know the Law provides general legal information, not legal advice.  We recommend that you consult a lawyer for guidance specific to your particular situation.

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