The Construction Advantage
A Lien is Not the End of the Line
A recent Nebraska case highlights the growing acceptance across jurisdictions of the principle that the presence or absence of a mechanic’s lien does not prevent a party from bringing a contractual or quasi-contractual claim arising from the same set of facts. Bloedorn Lumber Company of North Platte v. Nielson, — N.W. 2d —, 300 Neb. 722 (2018).
In Bloedorn, the contractor was hired to renovate the homeowners’ kitchen and build an addition on their house. The contractor installed new countertops and a sink before ceasing work. Pursuant to Nebraska’s construction lien law, both the contractor and the supplier of the countertops filed liens on the homeowners’ property. Neither party, however, perfected their liens by timely filing suit.
Eventually, but after the lien deadline, the supplier of the countertops brought suit against the contractor and homeowners alleging unjust enrichment for their failure to pay for the countertops. The contractor and homeowners then brought cross-claims against each other. The homeowners alleged they paid the contractor the full price for their planned home addition and that the contractor committed fraud and was liable for unjust enrichment. The contractor alleged the homeowners had been unjustly enriched by failing to compensate him for the installation of the countertops.
The trial court entered judgment in favor of the supplier on its unjust enrichment claim against the contractor, but dismissed the supplier’s unjust enrichment claim against the homeowners finding that they had not been unjustly enriched at the supplier’s expense. The court dismissed the homeowners’ cross-claim against the contractor, but entered judgment on the contractor’s unjust enrichment claim against the homeowners.
The homeowners appealed, arguing in part that because the contractor could have foreclosed on his construction lien, he was barred from pursuing a non-statutory, quasi-contractual claim. The Nebraska Supreme Court upheld the trial court’s decision. The Nebraska Supreme Court held, as common principle of interpretation, that a statute which provides a remedy will not displace or remove a common law right of recovery unless plainly provided for by the statutory language. The court found that the language of Nebraska’s construction lien law did not do so, and thus held that notwithstanding the contractor’s construction lien, he was still allowed to recover against the homeowners on his unjust enrichment claim.
Although a ME appellate court has yet to rule in a similar case, like Nebraska’s construction lien law, ME’s mechanic lien law also does not contain a specific limitation barring other, concurrent causes of action for the same set of facts. Although it is always advisable to file a mechanic’s lien given the added remedies available under the statute, failing to do so should not bar a party from recovering on other legal or equitable theories.
Mechanic’s Lien Causing Problems? Bond It Off
If there is one issue our Construction Practice Group encounters almost daily, it is the pursuit and defense of mechanic’s lien claims. A mechanic’s lien is a security interest in real property for the benefit of those who have supplied labor or materials to improve a house or building. For example, if you are an electrician working on a renovation project, and the general contractor is withholding payment, a mechanic’s lien could be recorded against the property. Recording a mechanic’s lien serves two purposes:
- It creates a point of leverage for shaking payment out of the general contractor
- It provides an additional avenue for recovery (allowing subcontractors to collect payment directly from property owner).
Preserving Lien Rights
The preservation of lien rights is governed by 10 M.R.S. § 3251 et seq. Under ME law, anyone that performs labor or supplies materials for a house or building has a lien on that property. Certain steps must be then taken in order to preserve that lien right:
- A general contractor must file a lawsuit within 120 days of the last work completed or materials integrated to the project
- A subcontractor (or general contractor) that does not have a contract directly with the owner of the property must record a notice of lien at the registry of deeds within 90 days of the last work completed or materials integrated into the project, and also file a lawsuit within 120 days
The presence of a mechanic’s lien can create a litany of issues for both homeowners and commercial property owners alike. It can violate the terms of a mortgage or financial agreement, prevent the timely sale of the property, or even result in the foreclosure and sale of the property.
Removing a Mechanic’s Lien and Clearing Title
In the event that a mechanic’s lien is causing issues, 10 M.R.S. § 3263 provides an opportunity to petition the court to substitute a Lien Replacement Bond in place of the lien, thereby clearing title to your property. This requires the filing of a formal petition and a hearing before the court to address the appropriate bond amount and terms. This is often a slow process; therefore, parties will often attempt to directly negotiate the terms of a substitute security. Lien Replacement Bonds can require collateral of 125% or more, and can cost as much as 2% of the bond amount annually.
Whether you need to remove a mechanic’s lien or record one to preserve your lien rights, the best decision is get an attorney involved early. Often the prompt involvement of counsel can save everyone involved both time and money.