A number of our clients are businessmen or companies who provide services for another on a structure or building to another, often under a contractor agreement or a subcontractor agreement. Again and again we are faced with varying cases of nonpayment. In order to recover payments owed for services provided, we are faced with a number of solutions, some of which prove more fruitful than others. One such solution is to file a Mechanic’s Lien.
Massachusetts General Laws Chapter 254 allows a laborer or contractor to file for a mechanic’s lien against the property of the owner of the building (or against the person giving consent for the work) upon which work was done. This action allows the worker to gain security for the value of services rendered and goods provided for improving the owner’s real estate. Furthermore, filing a Mechanic’s Lien allows a person searching the land records in the registry of deeds to determine whether or not the land is encumbered by such a lien. Thus, the purpose of Chapter 254 is two-fold: to provide the contractor with security of payment and to put others on notice of the lien.
Section 1 v. Section 2: The Advantages and Disadvantages of Both
Section 1
Under Section 1 of Chapter 254, “a person to whom a debt is due for personal labor performed in the erection, alteration, repair or removal of a building or structure . . . by virtue of an agreement with, or by consent of, the owner . . . shall, under the provisions of this chapter . . . have a lien upon such building or structure and upon such interest in such real property . . . owned by the party authorizing or consenting to said work. . . .”
What is notable about this provision is that no contract is needed to acquire a lien on the property worked on or real property owned by the person who consented to the work. Nevertheless, the lien is only good for thirty (30) days’ work performed for the ninety days next prior to filing a statement as required under Section 8[1]. In other words, the lien under section 1 is limited in duration and is really more of a temporary solution than a long-term benefit for the laborer.
Section 2
Under Section 2 of Chapter 254, a laborer that enters into a written contract with the owner or real estate or a person acting on behalf of the owner for the “erection, alteration, repair or removal of a building . . . or for furnishing material or rental equipment, appliances, or tools therefore, shall have a lien upon such real property . . . owned by the party with whom or on behalf of whom the contract was entered . . .” In order to enforce this lien, the laborer must first file a notice of contract with the registry of deeds for the county or district where the land lies. This notice of contract may be filed any time after the contract is entered into, whether or not the work has been performed. It must be filed not later than the earliest of the following three dates: (i) sixty days after filing or recording of the notice of substantial completion, as required by Section 2A,[2] (ii) ninety days after filing or recording of the notice of termination, provided for in Section 2B,[3] or (iii) ninety days after such person last performed or furnished labor or materials.
Of import, Section 2 liens do not have the time limitations that are placed on liens acquired under Section 1. There are, however, still important considerations and qualifications that must be noted. First, there are time limitations on filing based upon the time a notice of substantial completion or a notice of termination was filed, or based upon when work was last performed at the property. Thus, if a laborer is looking to collect on a job that he has not worked on for say, six months, Section 2 likely offers him no recourse, and he will have to look to the limited lien offered under Section 1. Often it may be tough to know within ninety days after completion of the work if the owner (or consenter) is going to withhold payment or short you on your money owed. Furthermore, an owner may start making payments and then stop more than ninety days after the work has been completed. In this regard, the Section 2 lien falls short.
Another consideration, and an important one, is that in order to file for a lien under Section 2, there must be a written contract between the parties. There has been much litigation and probably many headaches generated over what constitutes a written contract under Chapter 254. In the following section, this case law will be summarized in order to give laborers an idea as to what include in their documentation in the future.
What is a “Written Contract” under Chapter 254?
Under Section 2A of Chapter 254, a “written contract” is defined as “any written contract enforceable under the laws of the Commonwealth.” Primarily attorneys and courts have looked to the Statute of Frauds as the main law under which such “contracts” must fall to be enforceable in the Commonwealth. The Statute of Frauds requires three elements to render a contract enforceable: (1) the writing must indicate the existence of a contract; (2) it must be signed by the party to be charged, and (3) it must indicate the quantity of goods involved. See Section 2-201 of the Uniform Commercial Code for more information on the Statute of Frauds.
When most people think of a contract, they think of one document signed by both parties depicting in detail the work to be done, the dates of the work, the materials to be used, and the price of each service. While such a document is preferable and advisable in most instances, nevertheless a precise contract is not always available after the fact. Massachusetts case law delves further into the requirements of the Statue of Frauds, however, and finds that such a strict idea of what constitutes a contract is not always the sole means to satisfaction of the requirements. In Harris v. Moynihan Lumber of Beverly, Inc., 1999 WL 788621 (Mass.App.Div. 1999), the Court noted that “the requisite memorandum need not be a single document.” Thus, one can have several documents that, when put together, satisfy the requirements of the statute. Indeed, in Harris the Court determined that written quotations along with a signed, but incomplete, contract were sufficient to satisfy the requirements for a lien under Chapter 254.
Other courts in Massachusetts have similarly been willing to look at a number of documents to satisfy the “written contract” requirement of Chapter 254. See, e.g., Waltham Truck Equipment Corp. v. Massachusetts Equipment Company, 7 Mass.App.Ct. 580 (1979) (noting that “[a] letter of rejection can serve as an acknowledgment of the existence of a contract sufficient to make it enforceable”); Scituate Ray Precast Concrete Corp., et al. v. Intoccia Construction Company, Inc., 2002 WL 31998418 (Mass.Super. 2002) (holding that a series of delivery tickets and invoices satisfies the written contract requirement of M.G.L. Chapter 254). There are limits, however. See, e.g., Noreastco Door & Millwork, Inc. v. Vahradahatu of Massachusetts, Inc., 1999 WL 799337 (Mass.App.Div. 1999) (holding that faxes providing no specific information regarding the types of quantity of materials to be provided and setting no price terms were insufficient to satisfy the written contract requirement of M.G.L. Chapter 254).
As one can see, the law allows some flexibility in satisfying the “written contract” requirement of Section 2, Chapter 254. Nevertheless, if the Court finds that no “written contract” exists, the debtor may be left with only limited means of securing payment, such as the limited lien offered under Section 1.
CONCLUSION
To wrap up, there are a two ways to secure payment with a lien under Chapter 254 for nonpayment of goods or services made in the building, repair, remodeling or removal of a building. Both Section 1 and Section 2 have their own requirements, and both have their own advantages and disadvantages. Section 2 offers a more solid and long-lasting lien, while Section 1 offers more of a short-term solution with less requirements. While Section 2 may offered the preferred approach for a debtor, the debtor must be able to prove the existence of a “written contract” before Section 2 will offer any relief. Although there are several ways to meet the requirements of a “written contract,” which has been flexibly treated under Massachusetts law, it is good legal practice to always ensure that before starting any job, one should have a WRITTEN CONTRACT SIGNED BY BOTH PARTIES THAT DETAILS THE WORK TO BE DONE AND THE PRICE TO BE CHARGED! It may also be a good idea to contact a lawyer within 60 days after the work has been done if payment has not been received, thus giving the lawyer plenty of time before the 90-day period is up to file a lien under Chapter 254.
[1]The relevant portion of Section 8 reads as follows: “Liens under sections two and four shall be dissolved unless the contractor . . . shall . . . 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.” See Section 8 for the time restrictions on when this document, often referred to as a “Statement of Account,” must be filed.
[2] The relevant portion of Section 2A reads as follows: “Upon or after substantial completion of any contract subject to the provision of section two, the owner and contractor shall execute and file or record in the appropriate registry of deeds a notice of substantial completion . . . .”
[3] The relevant portion of Section 2B reads as follows: “If, prior to the filing or recording in the registry of deeds and delivery of the copies of the notice of substantial completion described in section two A, any contract subject to the provisions of section two shall have been terminated, the owner shall execute and file or record in the appropriate registry of deeds a notice of termination . . . .”
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