Connecticut’s Procedure for Substituting a Bond for a Mechanic’s Lien Needs to be Changed

The purpose of a mechanic’s lien is to provide collateral for a contract debt. If you perform work on a project and are not paid, then the mechanic’s lien laws allow you to attach the property where the work was performed. In other words, a mechanic’s lien provides you with a property right you can foreclose in the same manner a bank can foreclose a mortgage. However, before you can force a sale of the property to collect your money, you have to prove you are entitled to the payment you claim. Therefore, a mechanic’s lien could be in place a long time.

Because the lien laws are intended to provide security for a debt, but are not intended to prevent the property from being transacted, most states, including Connecticut, have a procedure by which a surety bond can be substituted for a mechanic’s lien. The problem with Connecticut’s procedure is that it is too long and cumbersome.

While a mechanic’s lien is in place, a property cannot be refinanced, or sold – at least not without addressing the mechanic’s lien to a lender’s and/or buyer’s satisfaction. It is possible that the property might be refinanced or sold if the owner places the lien amount in escrow,

Slander of Title is Almost Always an Inappropriate Response to a Mechanic’s Lien

On rare occasions, I have had to contend with a claim of “slander of title” being filed in response to a mechanic’s lien. A slander of title claim requires:

  • The making of a false statement pertaining to the owner’s title;
  • The making of the false statement must have been made “with malice”; and
  • The false statement must result in actual damages.

Neri Corp. v. McDermott Rd., LLC, 2016 Conn. Super. LEXIS 2067, *18 (Conn. Super., July 26, 2016). The requirement for the statement to have been made “with malice” means that the lienor either had acknowledged that the statements in its mechanic’s lien were false or that the lienor acted with “a reckless disregard of the truth.” Id. Both are very unlikely in the context of a mechanic’s lien.

As stated previously in this blog, the purpose of a mechanic’s lien is to provide security for an alleged debt arising out of work performed. Notwithstanding the foregoing, the “[f]iling of a mechanic’s lien like that of any other lien can be the basis of a slander of title action as long as all of the elements of the tort are met.” Id.

An Interesting Decision Discharges a Mechanic’s Lien

As discussed numerous times on this blog, the mechanic’s lien laws provide a security interest in privately owned real property in favor of those that improve it. According to Conn. Gen. Stat. §49-33, “[i]f any person has a claim for more than ten dollars for materials furnished or services rendered in the construction, raising, removal or repairs of any building or any of its appurtenances or in the improvement of any lot or in the site development or subdivision of any plot of land …then the plot of land, is subject to the payment of the claim.” While it is true that the type of work for which a mechanic’s lien may be enforced is sometimes subject to dispute, prior to the recent decision in CLW Real Estate Developments, LLC v. SAB Construction Management, LLC, the issue had been fairly well resolved.

Generally speaking, the types of services that support a mechanic’s lien are those that substantively improve the property. The Connecticut Appellate Court has “observed that a ‘mechanic’ has been defined as ‘a skilled worker who brings about a result by the use of tools, machines or equipment.’” Weber v.

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.

Only the “Owner” may seek Judicial Discharge of Mechanic’s Liens

The Connecticut Superior Court recently decided a case of first impression regarding the right to file an application for discharge of mechanic’s liens.  The court in Grade A Mkt., Inc. v. Surplus Contrs., LLC held that a lessee did not have “standing” to file an application for discharge of mechanic’s liens and dismissed the tenant’s application.  Grade A Mkt., Inc. v. Surplus Contrs., LLC, 2015 Conn. Super LEXIS 1342 (Conn. Super. May 26, 2015).  In layman’s terms, “standing” is the right to have the court decide your case.  The Grade A Mkt decision is interesting because it limits the ability of a tenant to obtain a discharge of mechanic’s liens even though the tenant’s lease with the owner may require the tenant to obtain a discharge of mechanic’s liens filed by contractors performing work for the tenant.

Mechanic’s liens are a statutory right that the legislature created to provide contractors and/or suppliers that furnish labor, materials, and/or services to a property with security for the alleged debt but mechanic’s liens were not intended to prevent the free transfer of property rights.  For that reason, the statutes provide a few different mechanisms by which an appropriate individual or company may obtain a release of the mechanic’s lien. 

Mechanic’s Liens – Legislative Update

Every year, state legislatures across the country pass new laws and revise old ones.  In fact, these state legislatures often tinker with existing statutes that have been in place for many years and are working as intended.  This year, the Connecticut legislature has raised a bill, Raised Bill No. 887, “An Act Concerning the Requirements for the Filing of a Mechanic’s Lien” (the “Act”), that may have an adverse effect on the construction industry through unintended consequences.

The Act would add a new requirement for a mechanic’s lien to be valid.  Specifically, the Act states that the contractor performing the work must hold “the appropriate registration or license to perform the services.”  On one hand, the Act has the valid purpose of discouraging unlicensed individuals from performing construction services.  On the other hand, this revision to the mechanic’s lien laws would be duplicative of the laws and regulations pertaining to licensure already in place insofar as the existing laws and regulations prohibit certain work from being performed without a license.  In addition, the mechanic’s lien statutes are not the best place to address this issue.

The mechanic’s lien laws were established in all fifty states to provide contractors and suppliers with recourse in the event of nonpayment for their labor,

An Explanation of The Home Improvement Act’s Licensed Contractor Exception

Chapter 400 of the Connecticut General Statutes is known as the Home Improvement Act.  “The purpose of the Home Improvement Act is to ensure that home improvements are performed by qualified people.”  Santa Fuel, Inc. v. Varga, 77 Conn.App. 474, 495 (Conn.App.,2003).  A “[h]ome improvement contract” means an agreement between a contractor and an owner for the performance of a home improvement.”  Conn. Gen. Stat. § 20-419.  As a general rule, a home improvement contract is not enforceable against a homeowner unless the contract complies with the writing requirements of the Home Improvement Act.  Laser Contracting, LLC v. Torrance Family Ltd. Partnership, 108 Conn.App. 222, 226, (Conn.App.,2008).

The Home Improvement Act serves a valid purpose but may be heavy handed in its application.  In holding that the failure to comply with the statutory requirements for a home improvement contract bars all recovery, including claims sounding in implied contract and unjust enrichment, the Connecticut Supreme Court said the following:

We recognize that our decision may lead to a harsh result where a contractor in good faith but in ignorance of the law performs valuable home improvements without complying with § 20-429. 

It is Not Always Clear Cut Which Services May Be the Basis of a Mechanic’s Lien

Conn. Gen. Stat. § 49-33 provides that those furnishing labor, materials or services for the improvement of real property are entitled to claim a lien on said premises.  “Prior to the statute’s amendment by the legislature in 1974, our cases construing the language of § 49–33 required, as a condition of lienability, that the work done be incorporated in or utilized in the building (or the appurtenance ) to be constructed, raised, removed or repaired.”  Santa Fuel, Inc. v. Varga, 77 Conn.App. 474, 482, 823 A.2d 1249, 1255 (Conn.App., 2003).  In 1974, the legislature amended Conn. Gen. Stat. § 49-33; however, “the 1974 amendment was not intended to expand the scope of [our mechanic’s lien laws] to include persons whose services do not enhance the property in some physical manner or lay the groundwork for the physical enhancement of the property.”  Nickel Mine Brook Associates v. Joseph E. Sakal, P.C., 217 Conn. 361, 363-364, 585 A.2d 1210, 1212 (Conn.,1991).  For that reason, numerous services pertaining to land cannot be the basis for a mechanic’s lien such as pipe removal, temporary electrical work, trash removal, cleaning services, and lawn mowing.  See Landscape Management Services, Inc.

A Connecticut Court Grants Defendant’s Motion To Stay An Application To Discharge Mechanic’s Lien Pending Arbitration

As regular readers of this blog know, a mechanic’s lien provides a contractor with a security interest in the real property where its work was performed.  Because, however, it is not the intent of the mechanic’s lien laws to restrict the free transfer of title of real property, there are two statutory procedures by which an owner may obtain a release of a mechanic’s lien.  Specifically, the property owner may seek to substitute a surety bond for the lien or the property owner may seek an order discharging or reducing the lien.  In CDO Properties, LLC v. Bogaert Construction Co., Inc., Docket No. CV 13-6018411 (JD of New London), the Court issued a decision staying the property owner’s application for discharge of a mechanic’s lien.  Based upon this decision, an owner’s attempt to promptly discharge a lien may be thwarted or delayed by a court and an owner may be forced to live with a lien until after arbitration.

The decision was based upon the Connecticut General Statutes, which require the court to stay any legal proceeding if the dispute is subject to an agreement to arbitrate.  Conn. Gen. Stat. § 52-409 states:

If any action for legal or equitable relief or other proceeding is brought by any party to a written agreement to arbitrate,

The Appeal of A Decision Discharging a Mechanic’s Lien Can Potentially Be Rendered Moot

As previously discussed in this blog, anyone that has furnished labor, materials, or services for the improvement of real property and has not been paid for its work may file a mechanic’s lien against the subject property.  The owner of said property may then make application to the court to obtain a discharge of said mechanic’s lien.  If the property owner prevails, the contractor that filed the mechanic’s lien has a statutory right to file an appeal.

As the Connecticut Supreme Court explained in Lichtman v. Beni, “an order entered pursuant to § 49–35b is a final judgment for the purposes of appeal.”  Lichtman v. Beni, 280 Conn. 25, 32 (2006).  Conn. Gen. Stat. §49–35c “requires that an appeal be taken within seven days of the court’s judgment, but provides an automatic stay during that period.”  Id.  However, a contractor seeking to appeal an order discharging its mechanic’s lien must also use to seven stay period to obtain an order preventing the owner from recording the court order discharging its mechanic’s lien.

If the contractor does not file an additional motion requesting that the court stay the order discharging the mechanic’s lien,