Massachusetts law allows unpaid contractors the right to put a lien on real estate to enforce their right to payment. Traditionally, the law has made it difficult for property owners to remove mechanic’s liens on their title. Even liens stating an inaccurate sum due can remain in place, so long as the contractor has not “willfully and knowingly” claimed more than it’s owed.
A recent Superior Court decision provides a rare example of a property owner obtaining discharge of the lien because of a contractor’s willful and knowing misstatements. The decision in Artizan General Construction Inc. v. Nine Zero Two Development, LLC, shows how property owners can obtain this unusual relief, even when the contractor claims it was acting in good faith.
A mechanic’s lien is an encumbrance against real estate similar to a mortgage. However, unlike a mortgage, a mechanic’s lien is obtained without the consent of a property owner, by a person who has improved the real property prior to being paid for the work performed.
Chapter 254 of the Massachusetts General Laws sets forth the procedural and statutory requirements a contractor must satisfy to properly create, perfect, and enforce a mechanic’s lien against real property. A mechanic’s lien can only be obtained by filing a series of documents with the Registry of Deeds and the Courts in strict conformance with the requirements of the statute.
Under § 15A of Chapter 254, any person aggrieved by the existence of a mechanic’s lien may seek an expedited hearing on a request to summarily discharge the lien. Generally, Massachusetts courts have held that summary discharge under § 15A of the mechanic’s lien statute is only available for defects in the lien that are readily apparent and ascertainable by reference to the undisputed documents that form the basis of the lien. This includes defects in the notice of contract or statement of account, a failure to timely record the required documents, or a judgment or release that would preclude the lien.
Further, even if it can be shown that the amount of the claimed lien is inaccurate, the lien will remain valid, “unless it is shown that the person filing the statement has willfully and knowingly claimed more than is due.” G. L. c. 254, § 11. Massachusetts courts have held that where “factual determinations are required,” relief under § 15A is inappropriate.
In Artizan General Construction Inc., the owner of property sought summary discharge of a mechanic’s lien recorded by its former general contractor. After being terminated by the owner, the general contractor filed a notice of contract indicating that it was due $305,848.66. After the owner advised the general contractor that the owner intended to post a bond dissolving the lien, the general contractor recorded a second notice of contract that exceeded the first by $450,000. This second notice of contract also included amounts owed to the general contractor’s subcontractors that the owner had already paid.
The timing of the second notice of contract (after the owner stated it intended to bond off the lien) combined with the “drastically different balance owed” in the two notices, convinced the Court that the second notice was “not only inaccurate but was done so willfully and intentionally so as to reflect an excessive lien.” The court allowed the owner’s motion to dissolve the lien even though the general contractor submitted an affidavit disputing that it knew of the owner’s intent to bond off the original notice of contract, or that the owner had made paid certain subcontractors.
This rare decision will give owners of real property encumbered by mechanic’s liens hope that a Massachusetts court may be more willing to summarily discharge a mechanic’s lien when the facts suggest that a lien was willfully and knowingly overstated.
For more information on this topic, please contact the author of this alert, Chris Miller or any member of the Prince Lobel Construction team.