Groundbreaking Developments Blog

Avoid Construction Project Pitfalls: The Hidden Risks of Seemingly Abandoned Rental Equipment on Construction Projects

June 13, 2024

By: Kenneth A. Sherman

Property owners and builders should take note of the Massachusetts Appeals Court’s decision in Bruno v. All. Rental Grp., LLC, 103 Mass. App. Ct. 170 (2023), which had to do with the validity of a subcontractor’s mechanic’s lien recorded in connection with a construction project in limbo. The Bruno court’s decision ought to remind property owners to ensure that all equipment supplied to a construction project, whether rented or owned, is removed from the real property as soon as it’s no longer needed and during periods of project suspension. Otherwise, as demonstrated in Bruno, the protections afforded to property owners by Section 4 of the Massachusetts mechanic’s lien statute (Chapter 254) are unavailable.

Section 4 of the mechanic’s lien statute provides for a 90-day window to file a notice of contract, which establishes (but does not perfect) the mechanic’s lien. The 90 days runs from the last day on which work or materials were supplied. However, even if a subcontractor’s work was last performed more than ninety days ago, it can record a notice of contract as long as another party also entitled to mechanic’s lien rights (general contractor, vendor, supplier, architect, engineer, sub-subcontractor, etc.) has contributed labor, equipment, materials, or services to the construction project (together “Beneficial Work”) within the 90-day period. If, however, no Beneficial Work was performed or supplied to the construction project in the ninety days prior to the filing of a notice of contract, any purported mechanic’s lien established by the filing of the notice of contract would be invalid and could be discharged.

In Bruno, the property owner (“Owner”) attempted to reduce a substantial portion of a mechanic’s lien established by a subcontractor hired by the Owner’s general contractor for the Owner’s construction project. The subcontractor rented heavy machinery to the general contractor for use on the construction project, and the general contractor failed to pay the subcontractor the full amount of the rental fees owed. The subcontractor recorded a notice of contract against the Owner’s real property comprised of the total cost of the rental for the entire time the equipment was present on-site.

In seeking to reduce the amount of the subcontractor’s lien, the Owner argued that the subcontractor was only entitled to a mechanic’s lien for rental fees for the period of time when the rental equipment was actually being used or “furnishe[d] … in the … improvement of real property.” Bruno, 103 Mass. App. Ct. at 175. The Owner argued that to find otherwise would be an impermissible expansion of the statute to consider periods of significant downtime on the project as furthering the improvement of real property.

The Bruno court disagreed and affirmed judgment on the full value of the mechanic’s lien, less minor, unrelated amounts. The court observed that while the landowner’s argument had some merit, “[t]he [mechanic’s lien] statute does not authorize judges to draw lines between periods of nonuse that are reasonable and those that exceed market norms to such a degree that the corresponding costs become unrecoverable through a mechanic’s lien.” Id. The court also mentioned that other jurisdictions allow for deducting periods of nonuse from mechanic’s liens, but until the Massachusetts legislature adopts such a provision, the mechanic’s lien statute does not allow for such reduction. Instead, the court determined the cut-off time to record a mechanic’s lien on this project to occur once the parties reasonably could predict that the rental equipment would no longer be needed for use on the project, relying on the parties’ testimony, in the absence “of any contrary directive from [the Owner]” or that the Owner “did not notify [the General Contractor] ‘in a reasonable way’ that its obligations were relieved.” Id.

In circumstances like these, the Bruno decision should remind construction project participants who might have mechanic’s lien exposure that they should require contractors to immediately stop providing goods or services as soon as they are no longer needed. Such participants should communicate this message clearly and in writing to be effective. Otherwise, as the Owner learned in Bruno, a court interpreting testimony after the fact may validate an otherwise invalid, out-of-time, and expired mechanic’s lien.

For questions on this decision, or how it may apply to you, please reach out to Kenneth Sherman, or other members of Prince Lobel’s Construction Group.

Comments are closed.

Sign up for updates

We publish Client Alerts regularly on a variety of business topics of interest to our clients.  Please let us know if you’d like to be added to our mailing list.