By: David Viens
A recent Massachusetts Appeals Court case reinforces the proposition that the Massachusetts Mechanic’s Lien Statute will be strictly construed by our courts and provides important clarity for owners and subcontractors on projects involving rental equipment and delays.
In Bruno v. Alliance Rental Group, LLC, the Appeals Court considered, among various other issues (not discussed in this article), whether the Mechanic’s Lien Statute, G.L. c. 254, § 4, gives a trial court judge authority to reduce a lien amount for periods where a subcontractor’s rental equipment is on the work site, but not being used for extended periods of time. In Bruno, a contractor, Ivester Construction Corp. (“Ivester”), rented heavy machinery from a subcontractor, Alliance Rental Group, LLC (“Alliance”), for subdivision improvement work on a property in North Reading owned by Michael Bruno (“Bruno”). Ivester failed to pay Alliance any of the rental fees. Alliance filed two mechanic’s liens on the property seeking nearly $700,000. Following a bench trial, a Superior Court judge awarded Alliance just $180,000 for the reasonable rental value of the equipment after deducting charges for extended periods in which the equipment was dormant due to various project delays. On appeal, the Appeals Court concluded that a judge has no such authority under the statute to reduce the lien amount based on periods of idleness or non-use of the equipment and ordered that the lien amount be increased to include the full rental charges for the entire time the equipment remained on site.
The rented equipment at issue included an excavator and loader. The rental agreements, which did not specify any end date, called for $6,000 monthly payments for each machine, plus sales tax and any repair costs. The equipment was last used to perform work on the project in October 2018, although the excavator remained on the property for another five months until March 2019 and the loader remained on the property even longer, until May 2019. Alliance invoiced Ivester nearly $700,000 for rental charges and repair costs for the two machines and the invoices went unpaid.
During the project, there were multiple periods of “down time” where construction was paused and the equipment was not used, including a one-year period waiting for a street permit, a one-year period waiting for an electrical permit, and a period waiting for broken drains to be repaired. Additionally, local regulations prohibited subdivision construction between December 1 and March 15 of each year. Both pieces of equipment were also removed from the property at various times for repairs. Although required by the rental agreement, Alliance did not maintain daily logs to track the use of the equipment, so there was no documentary evidence of precisely how and when the equipment was used. The trial judge determined that, based on industry practice, the parties’ expectations and estimates, and the amount of down time, the equipment was “furnished for improvements” for a total period of only fifteen months each at a value of $180,000. The judge based this amount on what he deemed to be the fair market value of the actual use of each piece of equipment, i.e., $6,000 per month for fifteen months each.
Under G.L. c. 254, § 4, a person (here, Alliance) who “under a written contract with a contractor” “furnishes rental equipment . . . in the . . . improvement of real property” may record a notice of contract and obtain a lien on the real property being improved (i.e., the “real property . . . owned by the party who entered into the original contract,” here, Bruno) to secure payment for the rental equipment. Alliance argued that it furnished rental equipment to the project for the entire time from when the rental agreements began until the equipment was removed from the site. The Owner Bruno argued that Alliance furnished rental equipment only for those periods of time that the equipment was used to perform work on the project, and that Alliance last furnished rental equipment to the project on the date that the equipment was last used to perform work on the project. The Court noted that while several other states have statutes that specifically limit mechanic’s liens for rental equipment to periods of actual use, the Massachusetts Legislature did not include such limiting language in G.L. c. 254, § 2. As such, the Court declined to read such language into the statute. The Court noted the oft-cited notion that a mechanic’s lien is not a common-law right, but a creature of statute, which compels strict compliance in order to obtain relief.
The Owner had urged the Court to interpret the statute to mean that equipment is only “furnished . . . in the . . . improvement of real property” during periods of actual use and primarily cited two cases in support. The Court disagreed, noting important distinctions between the two cases cited.
The first case cited involved a subcontractor’s transportation and delivery of a backup transformer, which was stored on the property only for possible future use, was never actually used, and which the court determined was not an “improvement of real property.” The court in that case reasoned that the backup transformer was never meant to be and was never used in connection with the actual construction at hand. Unlike the backup transformer in that case, the Bruno Court noted that the rented excavator and loader were intended to be, and were in fact, used for the “improvement of real property.”
The other case cited by the Owner involved comments by the court that the lien “is intended to protect the value of the use of [rental] equipment during the process of construction” and that “[t]ypically, that value is the fair rental value of the equipment for the time it is used in the construction process.” The Bruno Court noted, however, that the earlier court did not reduce the lien amount to “the fair rental value of the equipment for the time it [was] used,” but instead, merely excluded from the recoverable lien amount any compensation for damage to equipment or for equipment that was not returned. The Bruno Court explained that to reduce the recoverable amount to the fair rental value for the period of actual use, as urged by the Owner, would be a large expansion of the existing law without legislative authority, which it declined to do. Additionally, the Bruno Court noted the prior court’s use of the word “[t]ypically” to describe a lien’s value as the fair market value of actual use indicates that the court did not intend the reduction of a mechanic’s lien for periods of nonuse to be a legal rule. The Court thus agreed with Alliance that the trial judge erred in reducing the amount of the lien for periods of nonuse and concluded that Alliance’s lien would include the total rental amounts for the entire periods the equipment remained on the project site.
The Court did, however, agree with the Owner that the costs of repair of the rented equipment cannot be included in the lien amount under G.L. c. 254, § 4. The Court noted that the mechanic’s lien statute “contains no suggestion that mechanic’s liens are intended to cover . . . negligently inflicted damage” or “value of [rental] property which was damaged or not returned.” Further, the Court noted, “the lien does not cover the total value of the rental equipment . . . furnished where, under the contract, the equipment is intended to be returned to the subcontractor to be used in other projects. Rather, the lien is intended to protect the value of the use of such equipment during the process of construction.” While the excavator and loader were damaged during construction, presumably by Ivester, and required extensive repairs by Alliance, the Court determined that G.L. c. 254 does not permit recovery of the repair costs of the rental equipment via lien and thus excluded the substantial repair costs from the lien amount.
The Bruno decision reinforces that the Mechanic’s Lien Statute, as a creature of statute, will be strictly construed by Massachusetts’ courts. The decision also highlights that the statute remains a powerful tool for not just contractors and material providers, but also for providers of rental equipment for construction projects. The case makes clear that renters of equipment used for improvements on construction projects will be entitled to lien amounts under the statute that cover the entire period their equipment remains on a project site even where there are extended periods of delay resulting in non-use.