Tuesday, March 17, 2009

Filing Mechanic's Liens in Massachusetts-How to Avoid Mistakes

Mechanic's liens are definitely "traps for the unwary," which is an expression used in law. It is very easy to make a mistake when filing and perfecting liens, and unfortunately, most mistakes cannot not be remedied. Although there are many steps that contractors can take in their businesses to protect themselves legally, I would not recommend that they file mechanic's liens themselves.

The steps for filing a lien are as follows:

1. File a Notice of Contract at the Registry of Deeds. The Notice of Contract must be filed under the appropriate section of the Mechanic's Lien Statute, M.G.L. c. 254.

Section 2 applies to general contractors:

Such person may file or record the notice of contract at any time after execution of the written contract whether or not the date for performance stated in such written contract has passed and whether or not the work under such written contract has been performed, but not later than the earliest of: (i) sixty days after filing or recording of the notice of substantial completion under section two A; or (ii) ninety days after filing or recording of the notice of termination under section two B; or (iii) ninety days after such person or any person by, through or under him last performed or furnished labor or materials or both labor and materials.

Section 4 applies to subcontractors:

Such person may file or record the notice of contract at any time after execution of the written contract whether or not the date for performance stated in such written contract has passed and whether or not the work under such contract has been performed, but not later than the earliest of: (i) sixty days after filing or recording the notice of substantial completion under section two A; or (ii) ninety days after filing or recording of the notice of termination under section two B; or (iii) ninety days after the last day a person entitled to enforce a lien under section two or anyone claiming by, through or under him performed or furnished labor or materials or both labor and materials to the project or furnished rental equipment, appliances or tools.

The subcontractor must give actual notice to the Owner of the Notice of Contract.

Notice to the Owner is required for the subcontractor, but it is not required for the General Contractor under Section 2.

This alone provides an opportunity for mistakes in the filing of the lien.

The filing is finished by filing a Statement of Account under Section 8.

Liens under sections two and four shall be dissolved unless the contractor, subcontractor, or some person claiming by, through or under them, shall, not later than the earliest of: (i) ninety days after the filing or recording of the notice of substantial completion under section two A; (ii) one hundred and twenty days after the filing or recording of the notice of termination under section two B; or (iii) one hundred and twenty days after the last day a person, entitled to enforce a lien under section two 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.

In order to enforce the lien under Section 5, a suit must be filed within ninety days of the filing of the Statement of Account under Section 8. Then, an attested copy of the Complaint (lawsuit) must be filed at the Registry of Deeds within thirty days of filing the lawsuit.

If you miss any of these steps, then your lien will not be perfected (meaning it is not valid).

In addition, if you are a sub of a sub, you have to file a Notice of Identification under Section 4, within thirty days of the commencement of work:

If the person claiming a lien under this section has no direct contractual relationship with the original contractor, except for liens for labor by persons defined in section one of this chapter, the amount of such 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 his performance, given written notice of identification by certified mail return receipt requested to the original contractor in substantially the following form:

If this all sounds like too much legalese, it is! Liens are a powerful tool for contractors, but quite honestly, they are best left in the hands of professionals. Although I don't like to say this, that way, if there is an error, at least you will have recourse against your lawyer's malpractice insurance.