DON’T LET YOUR MECHANIC’S LIEN RIGHTS LAPSE DURING THE COVID-19 PANDEMIC

Because of the current crisis, the state has closed the courts to all activities except essential functions. Almost the entire civil docket has been suspended. In order to mitigate those effects, the Governor’s Executive Order No. 7G (the “Executive Order”) suspends “all time requirements, statutes of limitation or other limitations or deadlines relating to service of process, court proceedings or court filings” including “all time limitations in Chapters 959, 959a, 960 and 961 of the General Statutes.” The problem is that a mechanic’s lien is recorded on the land records (not in court) and mechanic’s liens are discussed in Chapter 847 of the General Statutes, instead of the chapters specifically mentioned above. Thus, regardless of whether the omission was intentional, mechanic’s liens are not expressly covered by the Executive Order.

Because land records are maintained by Connecticut’s municipalities, the Executive Order does not extend the deadline to record a mechanic’s lien. However, the problem with recording mechanic’s liens during the pandemic is that most City and Town Clerk’s offices are not open to the public. Each City and Town is handling the situation differently. Some are accepting submissions online. Others have a drobox outside City Hall or Town Hall.

When the Breach of a Construction Contract is not a Breach

The doctrine of substantial performance holds that a contractor’s breach of a construction contract does not entitle the owner to damages because the contractor’s performance was close enough to that which the contract required. “Technical violations are excused not because compliance [is] impossible, but because actual performance is so similar to the required performance that any breach that may have been committed is immaterial. Substantial performance occurs when, although the conditions of the contract have been deviated from in trifling particulars not materially detracting from the benefit the other party would derive from a literal performance, [the other party] has received substantially the benefit [it] expected, and is, therefore, bound to perform.” United Concrete Prod., Inc. v. NJR Constr., LLC, No. CV176011932S, 2018 WL 5733720, at *4 (Conn. Super. Ct. Oct. 17, 2018). The classic example of this doctrine is a situation where the contract specifies a product manufactured by Company A but the contractor provides the same product manufactured by Company B. Because the contract expressly stated that the product shall be manufactured by Company A, the installation of the same product manufactured by a different company is a breach of the contract. However, because the products are identical other than the name of the manufacturer,

FILING A MECHANIC’S LIEN WITHOUT AN ATTORNEY IS ALLOWED BUT DIFFICULT TO DO SO CORRECTLY

I don’t recommend that contractors file their own mechanic’s liens without the aid of an attorney. Every client and/or potential client that has ever come to me asking that I foreclose a mechanic’s lien that they filed on their own had some fatal defect. The reason for that is the arguably conflicting laws in the statutes and in the court decisions interpreting those laws.

A prime example of something that is not readily apparent by reading the mechanic’s lien laws is the notice and service requirements. According to our courts, “[r]ead together, [Sections] 49-34 and 49-35 [of the Connecticut General Statutes] require the [contractor filing the lien] to serve a copy of the certificate upon each owner of the property within 90 days after he ceased performing services or furnishing materials.” Steeltech Bldg. Prod., Inc. v. Viola, 2000 WL 726367, at *2 (Conn. Super. Ct. May 16, 2000). Of course, one may not reach that same conclusion reading [Sections] 49-34 and 49-35 on their own. According to Connecticut General Statutes § 49-34, “[a] mechanic’s lien is not valid unless the person performing the services or furnishing the materials [records a certificate of mechanic’s lien in the land records] within ninety days after he has ceased to do so…” However,

The Importance of Reading and Understanding Your Construction Contract

Everyone knows that they ought to eat right and exercise; yet, far too few of us do it. Similarly, proper construction contract management requires a contractor to thoroughly understand their contracts but many fail to do so. Of course, the reason that contractors are often largely ignored are understandable. Most construction contracts have the same substantive provisions with which contractors are already familiar; the specific requirements for any given project will be discussed at the preconstruction meeting; and the more specific details of any contract tend to only really matter in the rare occasions that the parties end up in a dispute they cannot resolve on their own. However, the few instances that result in litigation may make having proper practices in place for every project worthwhile.

On a positive note, most contractors that I encounter are now reading their contracts before signing them, as opposed to only reading them after a problem develops. As obvious as this may sound, actually taking the time to thoroughly read a contract before a project begins is the only way to be certain that you will fully comply with all your obligations. In addition, reading a contract before signing can prevent a contractor from experiencing an unfortunate surprise.

A Recent Superior Court Decision May Affect Subcontractor/Supplier Mechanic’s Liens

In a recent decision, the Superior Court discharged the mechanic’s liens of several subcontractors, because the general contractor had already filed a lien for the unpaid contract balance. Wegrzyniak v. Hanley Constr., LLC, WL 5706192 (Conn. Super. Ct. Oct. 30, 2017). Insofar as any substantial construction project will involve a general contractor, subcontractors, sub-subcontractors, and suppliers, there are obviously many potential lien claimants. Nonetheless, the court said that “[f]or good reasons, the mechanic’s lien statutes don’t permit multiple liens,” and with regard to the subcontractor whose lien included a claim for extra work, the court said that “[w]ithout an agreement to support the additional work…, [the subcontractor’s] lien must be discharge.” Id. In light of the foregoing, Wegrzyniak may stand for the proposition that subcontractors, sub-subcontractors, and/or suppliers are precluded from filing mechanic’s liens when the general contractor files a mechanic’s lien covering the entire project, but, in my opinion, subcontractors, sub-subcontractors, and suppliers should continue filing their own mechanic’s liens.

To summarize the reasoning of the Wegrzyniak decision in plain English, because the court understood that the property owner should not be held liable for more than the amount it agreed to pay the general contractor,

Recent Decision Demonstrates the Importance of Complying with Contract Notice Provisions

A common provision in construction contracts requires a contractor to give notice to the owner within a certain number of days of an event giving rise to a claim. Such provisions have a reasonable basis insofar as they ensure an owner will have a reasonable opportunity to investigate the conditions for which a claim for additional compensation is being made. Traditionally, such notice provisions were not strictly enforced. The general approach seemed to be that — provided the owner was not prejudiced by any delay in giving notice of claim — a claim that was not submitted within the specified time limit would not be barred. The more recent trend, however, has been to more strictly construe such provisions.

In J. Wm. Foley, Inc. v. United Illuminating, the Appellate Court held that the contractor’s failure to submit its delay claim within the ten-day time limit specified by the contract was a bar to the claim. This decision is potentially troublesome for a couple of reasons: First, there is no reference to the owner suffering any prejudice as a result of the delay. Second, the decision indicated that the submission of the delay claim required a critical path analysis of the delay.

There’s a New Proposed Law Regarding Emergency Services That Everyone Should Support

Parties are free to enter into contracts with any terms and conditions to which they both agree — but that right is not absolute. Certain contract terms are void by statute or case law based upon public policy considerations. For example, in Connecticut, the General Statutes do not allow contractors to prospectively waive their mechanic’s lien rights and the General Statutes do not allow contracting parties to have another state’s laws govern a dispute arising out of a construction project within Connecticut. However, the most onerous example of a statute that potentially voids an otherwise enforceable contract is the Home Improvement Act.

As previously discussed here, the Home Improvement Act can lead to unfair results. As upheld by the Connecticut Supreme Court, any contract that does not contain certain elements required by Conn. Gen. Stat. § 20-429 is unenforceable and the contractor that enters into such an agreement with an owner may also be held liable for a violation of the Connecticut Unfair Trade Practices Act. Under the terms of the Home Improvement Act, a contract that does not include notice of cancellation rights violates the statute. Thus, the owner of any home improvement project must be allowed three business days to cancel a home improvement contract after it is executed.

A Mechanic’s Lien: Something Simple That’s Been Made Complicated

One of the first things I was ever taught about mechanic’s liens is that the legislation’s original intent was for a contractor to be able to perfect a mechanic’s lien without the aid of an attorney. If that’s true, the system is not working as intended. Of course, that is not surprising given the complicated legislation and its arguably inconsistent interpretation.

A mechanic’s lien is unique insofar as it allows a contractor to obtain an interest in real property without requiring any kind of hearing or notice. As long as the lien documents are properly prepared, recorded, and served, the lien is in place. In addition, the fact that mechanic’s liens have priority dates that relate back to the first day that the contractor performs work and/or supplies materials, mechanic’s liens that did not exist when a mortgage was given or the property was sold can appear on the land records after such transactions and take priority over an earlier filed mortgage and/or encumber property owned by someone who was not the property owner at the time the work was performed, materials were supplied and/or services were rendered.

Of course, reading the statutes is not sufficient to completely understand mechanic’s liens.

Basing a Claim on the Total Cost Approach is Likely Throwing Good Money After Bad

Construction projects never go completely as planned. Construction managers, general contractors, subcontractors and suppliers all realize that changes in the work may be required for any number of reasons. For example, an area of the site may not become available due to the lack of an easement; there may be poor communication and/or coordination between trades; plans and/or specifications may contain certain deficiencies; critical shipments may be delayed; or, as allowed by most construction contracts, the owner simply may make design changes after the commencement of the work. One or more of the foregoing situations arises on almost every project. As a result, it is expected that construction schedules will be periodically updated during a project to address where the actual performance of the work was not completed in accordance with the original schedule.

Schedule revisions are so commonplace that some specifications require construction schedules to be updated on a monthly basis with two or three-week “look aheads” provided in between schedule revisions. The goal is not to complete the work in accordance with some original plan that Nostradamus would not be able to accurately create. The goal is to complete the work by the completion date no matter what problems arise.

Contractual Time Limits for Providing Notice of Claim Must be Taken Seriously

The Connecticut Appellate Court recently issued a decision that should cause every contractor some concern.  In J. WM. Foley Inc. v. United Illuminating Co., 158 Conn. App. 27 (Conn.App. 2015), the Appellate Court upheld a decision that denied a contractor’s $4.7 million delay claim because the contractor did not provide proper notice of the claim within the 10 days required by the contract.  The case is disconcerting because the court’s decision appears to be based upon the contractor’s failure to strictly comply with the contract’s notice provision.  There is no discussion indicating that the owner was harmed or prejudiced by the delay in receiving notice of the claim.  Moreover, the decision acknowledges that the contractor had provided the owner with notice of events giving rise to the claim.  In fact, despite denying the delay claim, the trial court awarded the plaintiff over one million dollars for its direct costs, which arose out of the same facts as the delay claim.

 

The project underlying the dispute in J. WM. Foley Inc. was the construction of a utility pipeline.  The parties’ agreement stated that the contractor was expected to encounter subsurface obstructions and that the contractor would be entitled to additional compensation associated with same.