I recently posted on recent changes to the Mechanic’s Lien Law that allow “design professionals” to create and enforce liens. Following up on the mechanic’s lien topic, on August 29, 2011, the Appeals Court ruled that a lien filed by a subcontractor was not allowed because prior nonperformance by the general contractor had released the project owner from any duty to make further payments under the original contract. The important point under the Mechanic’s Lien Law, G.L. c.254, §4, is that a payment “due or to become due” from the owner to the general contractor must exist at the time the subcontractor files its notice of contract.
The particular case (Maverick Construction Management Services, Inc. v. Fidelity & Deposit Company of Maryland, Inc.) concerned the reconstruction of an athletic field complex at Nichols College by the general contractor, Evergrass, Inc. Evergrass had subcontracted with Maverick Construction Services, Inc., to excavate the site, place subsurface materials and install a drainage system. Evergrass delivered the facility to the College in September 2005, just in time for the football season. However, serious drainage problems quickly developed that Fall. The cost of the repairs were later determined to far exceed the outstanding balance due under the general contract. Although the College never formally issued a notice of termination to Evergrass, the College broke off negotiations with Evergrass and subsequently hired a new general contractor to remove the deficient field and install a new one.
During the course of the unsuccessful negotiations between the College and Evergrass, Maverick filed its “notice of contract” under the Mechanic’s Lien Law to assert its unpaid subcontract balance. Maverick subsequently sued Evergrass for the unpaid subcontract balance and sued the College for enforcement of its lien.
The Superior Court’s rejected Maverick’s lien because no payment was “due or to become due” to Evergrass under the original contract at the time Maverick filed its notice of contract, which the Appeals Court affirmed. No amounts were due to Evergrass at the time the project was delivered to the College because, at that time, Evergrass’ breach of contract required remedial expenditures that far exceeded the general contract’s retainage balance. Because Maverick’s subcontractor lien was asserted after the project was delivered, when no amounts were “due or to become due” under the contract, Maverick’s subcontractor lien failed.
This case is another reminder to owners, contractors and subcontractors that the Mechanic’s Lien Law, G.L. c.254, contains numerous, detailed requirements that must be followed strictly in order to create and enforce a lien. Additionally, for subcontractors, it is important to understand the status of the general contractor’s contract with the owner in order to evaluate the viability of a possible lien.
Please contact me if you or a colleague has a question regarding creation or enforcement of a mechanic’s lien.
Monday, September 12, 2011
Thursday, August 11, 2011
ARE YOU COVERED BY THE NEW DESIGN PROFESSIONAL'S LIEN LAW?
Property owners, contractors, lenders, architects, engineers, LSPs and surveyors should be aware of important new legislation allowing "design professionals" to place a lien against a property to secure payments due under a contract for professional services. The list of design professionals includes architects, professional engineers, licensed site professionals (LSPs), land surveyors and landscape architects who are licensed or registered in Massachusetts. (The list does not include professional wetland scientists, registered sanitarians or other environmental professionals.) This new law took effect on July 1, 2011.
The Mechanic's Lien Law, General Laws Chapter 254, has long provided a mechanism for building contractors, subcontractors and material suppliers to recover money due under a construction contract. Chapter 254 describes how the lien is created (file a notice of contract), perfected (file a lawsuit to enforce the lien), and enforced (sell the property and collect amounts due relative to other recorded security interests), along with many other critical details. However, prior to the July 1st amendments, architects, engineers, LSPs, and other design professionals typically did not have rights under the Mechanic's Lien Law.
Here are some considerations for design professionals (and building owners, developers, landlords and lenders) under the new law. Of course, the statute must be read in full to appreciate all of its considerations.
1. There must be a written contract. If the written contract is not directly with the owner (e.g., a subcontract with the prime, or first tier, design professional), the owner must approve of the contract in writing.
2. It must be a private project due to the continued exception for public property.
3. The design professional must be licensed or registered in Massachusetts. The lien can be claimed by an individual professional or a corporate entity that is authorized to practice one of the professions.
4. The design professional's lien can be created and enforced whether or not the building or improvement is commenced or completed and whether or not the professional services have been completed.
5. The design professional may record its Notice of Contract at the Registry of Deeds (or Land Court district) at any time as long as it is before the end of the statutory deadlines (i.e., the earlier of 60 days after Notice of Substantial Completion or 90 days after last performing services), and provide notice of the recording to the owner.
6. The design professional must record its Statement of Account within 30 days after the deadlines to record the Notice of Contract (see above).
7. The design professional must file its lawsuit (a Verified Complaint) in court to enforce its lien within 90 days after filing its Statement of Account, and record the Complaint at the Registry within 30 days after it is filed.
8. The design professional must prevail in its lawsuit and then move to enforce the judgment (e.g., force a sale and recover proceeds) if the matter has not been resolved.
9. Owners, developers and lenders should consider requiring lien waivers from design professionals as well as design professional subcontractors, just as they require them from contractors, subcontractors and material suppliers.
10. Owners and developers should consider modifying their construction contracts to require contractors to address liens created by design professionals and to provide indemnification and defense of such liens, just as those provisions may be required for liens created by contractors, subcontractors, and material suppliers.
Please contact me if you or a colleague has a questions on this e-mail or construction projects involving mechanic's liens for contractors or design professionals.
The Mechanic's Lien Law, General Laws Chapter 254, has long provided a mechanism for building contractors, subcontractors and material suppliers to recover money due under a construction contract. Chapter 254 describes how the lien is created (file a notice of contract), perfected (file a lawsuit to enforce the lien), and enforced (sell the property and collect amounts due relative to other recorded security interests), along with many other critical details. However, prior to the July 1st amendments, architects, engineers, LSPs, and other design professionals typically did not have rights under the Mechanic's Lien Law.
Here are some considerations for design professionals (and building owners, developers, landlords and lenders) under the new law. Of course, the statute must be read in full to appreciate all of its considerations.
1. There must be a written contract. If the written contract is not directly with the owner (e.g., a subcontract with the prime, or first tier, design professional), the owner must approve of the contract in writing.
2. It must be a private project due to the continued exception for public property.
3. The design professional must be licensed or registered in Massachusetts. The lien can be claimed by an individual professional or a corporate entity that is authorized to practice one of the professions.
4. The design professional's lien can be created and enforced whether or not the building or improvement is commenced or completed and whether or not the professional services have been completed.
5. The design professional may record its Notice of Contract at the Registry of Deeds (or Land Court district) at any time as long as it is before the end of the statutory deadlines (i.e., the earlier of 60 days after Notice of Substantial Completion or 90 days after last performing services), and provide notice of the recording to the owner.
6. The design professional must record its Statement of Account within 30 days after the deadlines to record the Notice of Contract (see above).
7. The design professional must file its lawsuit (a Verified Complaint) in court to enforce its lien within 90 days after filing its Statement of Account, and record the Complaint at the Registry within 30 days after it is filed.
8. The design professional must prevail in its lawsuit and then move to enforce the judgment (e.g., force a sale and recover proceeds) if the matter has not been resolved.
9. Owners, developers and lenders should consider requiring lien waivers from design professionals as well as design professional subcontractors, just as they require them from contractors, subcontractors and material suppliers.
10. Owners and developers should consider modifying their construction contracts to require contractors to address liens created by design professionals and to provide indemnification and defense of such liens, just as those provisions may be required for liens created by contractors, subcontractors, and material suppliers.
Please contact me if you or a colleague has a questions on this e-mail or construction projects involving mechanic's liens for contractors or design professionals.
Friday, May 6, 2011
Liability of Commercial Landlords and owners for Unsafe Conditions
In a recent decision, the Massachusetts Supreme Judicial Court held that a commercial landlord has a statutory duty to correct an unsafe condition as long as the tenant provided written notice of the condition and the tenant did not cause the condition. A commercial landlord has that duty even if the lease provides that the tenant is responsible for repairs and replacement.
The statutory duty arises from General Laws Chapter 186, Section 19. The duty may not be waived in any lease or rental agreement; any such waiver “shall be void and unenforceable.”
Based on this new case, it is important that owners, landlords and property managers respond to written notices provided under the statute even if the tenant is responsible for repairs under the lease. It is also important that the lease provides that the landlord can recoup costs if it is called upon to make repairs.
The new case is Bishop v. TES Realty Trust, wherein the tenant provided the landlord with written notice (by certified mail, return receipt requested, per the statute) complaining about a leaking roof and skylights. The landlord repaired the roof but not the skylights. The tenant claimed that plaster fell from the roof by the skylight into her eye, causing her to fall and suffer injuries. In its defense, the landlord claimed that the statute did not apply to commercial landlords and that the lease obligated the tenant to make repairs. Unfortunately for commercial owners and landlords, the SJC disagreed.
In addition to the “statutory duty” at issue in Bishop, the SJC identified two instances under “common law” where a commercial landlord is liable for injuries arising from unsafe conditions on the landlord’s property: (1) the landlord contracted to make repairs and made them negligently, and (2) the defect that caused the injury was in a common area or other area appurtenant to the leased area over which the landlord had some control.
The Court had an interesting comment on lease provisions that impose a duty to repair on the tenant: “The statutory duty imposed by §19 applies only where the required notice of an unsafe condition has been provided to the landlord. Where the lease imposes on the tenant a duty to repair, the tenant is unlikely to provide such notice, and is more likely to repair the condition herself. Where a tenant with such a duty under the lease gives the required notice and the landlord remedies the unsafe condition, the landlord may bill the tenant for the cost of repair or, as expressly provided under the lease in the instant case, charge the cost of repair as additional rent. And if the application of §19 to commercial landlords does, in practice, devour the common-law rule or allow commercial tenants to shirk their responsibilities under a lease, commercial landlords may petition the Legislature to limit §19 to residential landlords, as the Legislature has done in many other statutes.”
Accordingly, owners, landlords and property managers should consider reviewing their leases to confirm that the provisions concerning tenant’s duty to repair, waiver of landlord obligations, and landlord’s ability to bill a tenant for the cost of repair or charge a repair cost as additional rent, comply with the holding in the Bishop case. Landlords and managers should also be prepared to evaluate written notices sent by tenants pursuant to G.L. c. 186, §19, to determine if an unsafe condition should be corrected by the landlord, and make those corrections if they are required by statute, even if the lease requires the tenant to make repairs.
Please contact me if you or a colleague has a question on the Bishop case or this e-mail.
The statutory duty arises from General Laws Chapter 186, Section 19. The duty may not be waived in any lease or rental agreement; any such waiver “shall be void and unenforceable.”
Based on this new case, it is important that owners, landlords and property managers respond to written notices provided under the statute even if the tenant is responsible for repairs under the lease. It is also important that the lease provides that the landlord can recoup costs if it is called upon to make repairs.
The new case is Bishop v. TES Realty Trust, wherein the tenant provided the landlord with written notice (by certified mail, return receipt requested, per the statute) complaining about a leaking roof and skylights. The landlord repaired the roof but not the skylights. The tenant claimed that plaster fell from the roof by the skylight into her eye, causing her to fall and suffer injuries. In its defense, the landlord claimed that the statute did not apply to commercial landlords and that the lease obligated the tenant to make repairs. Unfortunately for commercial owners and landlords, the SJC disagreed.
In addition to the “statutory duty” at issue in Bishop, the SJC identified two instances under “common law” where a commercial landlord is liable for injuries arising from unsafe conditions on the landlord’s property: (1) the landlord contracted to make repairs and made them negligently, and (2) the defect that caused the injury was in a common area or other area appurtenant to the leased area over which the landlord had some control.
The Court had an interesting comment on lease provisions that impose a duty to repair on the tenant: “The statutory duty imposed by §19 applies only where the required notice of an unsafe condition has been provided to the landlord. Where the lease imposes on the tenant a duty to repair, the tenant is unlikely to provide such notice, and is more likely to repair the condition herself. Where a tenant with such a duty under the lease gives the required notice and the landlord remedies the unsafe condition, the landlord may bill the tenant for the cost of repair or, as expressly provided under the lease in the instant case, charge the cost of repair as additional rent. And if the application of §19 to commercial landlords does, in practice, devour the common-law rule or allow commercial tenants to shirk their responsibilities under a lease, commercial landlords may petition the Legislature to limit §19 to residential landlords, as the Legislature has done in many other statutes.”
Accordingly, owners, landlords and property managers should consider reviewing their leases to confirm that the provisions concerning tenant’s duty to repair, waiver of landlord obligations, and landlord’s ability to bill a tenant for the cost of repair or charge a repair cost as additional rent, comply with the holding in the Bishop case. Landlords and managers should also be prepared to evaluate written notices sent by tenants pursuant to G.L. c. 186, §19, to determine if an unsafe condition should be corrected by the landlord, and make those corrections if they are required by statute, even if the lease requires the tenant to make repairs.
Please contact me if you or a colleague has a question on the Bishop case or this e-mail.
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