mechanic's lien Archives - Page 3 of 3 - Attorney Scott S. Orenstein

If Your Mechanic’s Lien is Discharged, You’ve Lost the Battle But Not the War

After a mechanic’s lien is filed, an owner has two options. The owner can wait because, if the lien is not foreclosed within a year, it evaporates by operation of law; or, the owner can file an application with the court seeking an order discharging the lien. If the owner files an application for discharge, the court will hold a hearing during which the contractor “shall first be required to establish that there is probable cause to sustain the validity of his lien,” and, if that occurs, the owner must “prove by clear and convincing evidence that the validity of the lien should not be sustained or the amount of the lien claimed is excessive and should be reduced.” Conn. Gen. Stat. §49-35b. Thus, if a lien is discharged, either there was not “probable cause” to sustain the lien or the owner was able to present “clear and convincing evidence” that the lien should be discharged. In either case, it is evidence that the contractor’s claim for the underlying debt was weak.

The question then is whether a contractor may commence its own action against the owner to the collects the amounts that had been secured by a mechanic’s lien that had been discharged after a hearing.

Connecticut Statutes Provide Assistance with Receiving Prompt Payment on Public and Private Construction Projects

Under Connecticut law, an owner should pay its general contractor within 30 days of having received the general contractor’s application for payment; the general contractor, in turn, is required to pay its subcontractors and suppliers within 30 days of having received payment from the owner; and the subcontractors should then pay their sub-contractors and suppliers within 30 days of having received payment from the general contractor and so on down the line. See Gen. Stat. § 49-41a and Conn. Gen. Stat. § 42-158j.

The provisions in § 49-41a and § 42-158j are substantially similar except that:

1.) Only private owners are required to make payment to their general contractors within a specified number of days after receiving an application for payment; and

2.) The statute only applies to public projects for which a payment bond is required, which is any public works project whose contract amount exceeds $100,000.

Both statutes also have similar enforcement procedures. Either a subcontractor on a public project to which the statute applies or general contractors and subcontractors on a private project can make demand for payment by way of registered or certified mail and, within 10 days,

Restarting the 90 Day Clock to File a Mechanic’s Lien

As most contractors are aware, in Connecticut, you have 90 days after the last day that you supply labor and/or materials to file a mechanic’s lien. Many other states have the same or a similar requirement pertaining to when a mechanic’s lien can be filed. The question that is often asked is which “last day” starts the clock.

In a common scenario, additional work is performed more than 90 days after what was originally thought to be the last day worked and the contractor then claims that the second last day starts a new 90 days clock to file a mechanic’s lien. Sometimes such mechanic’s liens are upheld but they are typically invalidated. The reason is that the typical scenario involves a contractor – who has not been paid – realizes that his time to file a mechanic’s lien has expired so he returns to the site to perform a minor punchlist item that was inadvertently left undone initially. Generally speaking, to restart the mechanic’s lien clock, a contractor must perform substantive work that was authorized by the owner or someone rightfully acting on the owner’s behalf. The most recent guidance on this issue was provided by the Connecticut Appellate Court in Cianci v.

Court Upholds A Mechanic’s Lien Served More Than A Year After It Was Filed

Under Connecticut Law, “a mechanic’s lien shall not continue in force for a longer period than one year after the lien has been perfected unless the party claiming the lien commences an action to foreclose it.” Conn. Gen. Stat. § 49-37. Similarly, “[w]henver a bond has been substituted for any [mechanic’s] lien . . . , unless an action is brought to recover upon the bond within one year from the date of recording the certificate of lien, the bond shall be void.” Thus, in both instances, the law requires a lawsuit to be commenced within one year of the mechanic’s lien having been recorded or the right to make a claim on the lien or a bond substitute therefor is gone. In Connecticut, a lawsuit is commenced when the Writ, Summons and Complaint is served upon the defendant by a marshal. Yet, recently, a Superior Court Judge refused to dismiss an action on a bond substituted for a lien that was not served until after the one year time limit had expired. See Frank Lill & Son, Inc. v. O&G Indus., 2012 Conn. Super. LEXIS 2844 (Conn. Super. Ct. Nov. 26, 2012)

The Lill decision is surprising because it is often said that,

Different Treatment for Different Mechanic’s Lien Deadlines

The Connecticut courts have often been schizophrenic in their interpretation of Connecticut mechanic’s lien law. On one hand, the courts refer to mechanic’s liens as a right created by statute and, therefore, must be strictly interpreted. On the other, the courts refer to mechanic’s liens as remedial in nature and, therefore, should be liberally construed. Based upon some recent decisions, it appears that that deadline to record and serve the mechanic’s lien is being strictly interpreted but the deadline to foreclose the lien is being liberally construed.

For a mechanic’s lien to be valid, it must be recorded within 90 days of the last day worked. The mechanic’s lien, however, will expire if not foreclosed within one year of its recording. Recently, the courts examined whether: 1.) the 30 day time limit for service was included within the 90 days for recording; and 2.) if the 30 days a marshal has to serve papers extended the one year deadline to foreclose. Based upon the language of the statutes, the decisions came out the exact opposite as you might expect.

Conn. Gen. Stat. §49-34 states that the lien must be recorded within 90 days after the last date worked and served upon the owner within 30 days of recorded the certificate.

Pending Legislation Concerning Mechanic’s Liens

Right now, the Connecticut Legislature is considering Proposed Bill No. 5682 (the “Proposed Act”), which states as its purpose “[t]o establish a process for the holder of a mechanic’s lien to establish priority for the lien effective upon the filing of a ‘Notice of Commencement of Work’ with the town clerk for recording with deeds of land.” The text of the Proposed Act states, however, that the lienor must be an architect and that the lienor’s priority is established upon the date of filing. Such language raises many questions.

The “priority” of a mechanic’s lien pertains to where the mechanic’s lien stands in line with regard to the other claims against a property such as mortgages and other interest should the property go into foreclosure. Presently, the priority of a mechanic’s lien relates back to the first date that the lienor, i.e. the person filing the mechanic’s lien, worked on the project. There is some logic in creating a separate statute for design professionals because – unlike an excavation contractor – no one can see when a design professional starts work but, if that were the reason for the change, why does the Proposed Act only pertain to architects and not engineers as well.

A Contractor That Acts as His Own Expert Witness May Inadvertently Waive Attorney Client Privilege

The general rule is that a party does not have to disclose communications with its attorney seeking legal advice. A recent Superior Court decision, Noble v. the City of Norwalk, 2012 Conn. Super. LEXIS 2017, however, has found an exception to the attorney client privilege that contractors need to be aware about.

During a trial, witnesses are not allowed to give their opinion unless they are qualified as an “expert.” Under the legal definition, an “expert” is anyone that has knowledge through education, training or experience that would be helpful to the jury given the subject matter of the lawsuit. Based upon the foregoing definition, almost anyone can qualify as an expert if the right case came along. For example, my 13-year-old daughter has been taking ballet lessons since she was 3. If ballet ever became relevant to a key issue in a lawsuit, my daughter would qualify as an expert on that subject.

In construction litigation, there are always questions that are not clearly fact or opinion. For example, the amount of time that the forms have to remain in place after a concrete pour is a subject upon which there is disagreement and often depends upon the structure that was poured and the conditions under which the concrete was placed.

The Standard Procedure for Obtaining Lien Waivers May Be Ineffective

A recent Superior Court decision should cause general contractors and owners to reevaluate their procedures for obtaining lien waivers. Typically, signed lien waivers are submitted after the work is performed but before payment is received. On a basic level, the procedure makes sense because the owner does not want to issue payment to its general contractor unless it is sure that it’s protected from potential mechanic’s liens. While the general contractor and its subcontractors may argue that they should not have to provide lien waivers until they receive payment, they are generally protected if the owner does not actually issue the payment described in the lien waiver because standard lien waiver language makes it clear that the waiver is not effective unless the payment described therein is actually received.

In Milone & MacBroom, Inc. v. Winchester Estates, 2011 Conn. Super. LEXIS 2688, the Superior Court considered whether a lien waiver is valid when:

1. The lien waiver is issued after the work is performed:
2. The lien waiver is executed before payment is received; and
3. The payment described in the lien waiver is received three weeks after the lien waiver was signed.

Don’t Get Creative When Attempting To Enforce Mechanic’s Lien Rights

In Connecticut, the law pertaining to mechanic’s liens is well settled. You will not come across many issues of first impression while trying to enforce a mechanic’s lien and, therefore, practitioners should not attempt to drive the proverbial square peg into a round hole. Such an attempt was made (and failed) in a matter recently decided by the Connecticut Superior Court.

In that case, an assignee of a mortgage brought a foreclosure action and named a contractor as a defendant because the contractor’s mechanic’s lien was subsequent in right to the interest being foreclosed. Normally, if the property proceeds all the way through the foreclosure process, a contractor holding a subordinate lien allows his interest in the property to expire because the only way to maintain the lien is to pay off the foreclosing mortgage but , in this case, the contractor did not give up that easily.

Here, the contractor alleged that the assignee became the “owner” of the property by virtue of the construction mortgage and, as such, was responsible to pay for the work that the contractor performed. The court identified 2 issues that allowed the court to dispose of the contractor’s claim on summary judgment.

Scott Orenstein
06.18.2011
Construction Law, mechanic's lien, notice

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