A recent Superior Court decision should serve as a warning to contractors, subcontractors, and suppliers (“contractors”) throughout Massachusetts that mechanic’s liens filed with willful and knowing misstatements may be involuntarily dissolved by the Court. Pursuant to M.G.L. c. 254, Massachusetts allows any contractor that has furnished labor or materials to a private construction project to record a mechanic’s lien on the underlying property to enforce their right to payment. Under the statute, a mechanic’s lien, once properly recorded and perfected, provides the unpaid contractor with a security interest (akin to a mortgage) on the property. As mechanic’s liens do not require the express consent of the property owner or court approval to exist and are difficult to remove from a property’s title, they serve as a useful tool for contractors to get paid for their work. In fact, even if the parties dispute the amount owed through a mechanic’s lien it will remain valid, “unless it is shown that the person filing the statement has willfully and knowingly claimed more than is due.” G. L. c. 254, § 11. Now, however, contractors seeking a mechanic’s lien, must not only adhere to the specific and time-sensitive process outlined by the statute, but take steps to accurately state their claim for fear that a court will summarily discharge a lien that contains any willful and knowing misstatements.
Recently, a Superior Court judge, in a rare decision, determined that a contractor’s second notice of contract was not only inaccurate, but also filed with willful and intentional misrepresentations as to warrant the rare remedy of summarily dissolving the underlying lien. Specifically, in Artizan General Construction Inc. v. Nine Zero Two Development, LLC, a general contractor filed a notice of contract indicating that it was due $305,848.66 after being terminated from a private construction project by its owner. After filing suit against the general contractor in Suffolk Superior Court, owner’s counsel also advised the general contractor that the owner intended to “bond over” the lien created by the first notice of contract, to ensure that the general contractor’s lien was secure and so that the owner could complete the project. In response, the general contractor recorded a second statement of account that was more than $450,000 higher than in the first notice of contract it had recently recorded. After doing so, and so as to perfect its lien as stated in the second notice of contract, the general contractor then incorporated that higher figure into the complaint it filed in Middlesex Superior Court.
In response to the owner’s emergency motion to dissolve the general contractor’s second notice of contract and statement of account, the Court summarily discharged the general contractor’s lien as articulated in its second notice of contract and determined:
… At this stage of the litigation, the court concludes that there is sufficient information to find that [general contractor’s] second notice of contract is not only inaccurate but was done so willfully and intentionally so as to reflect an excessive lien such that it would prevent Nine Zero Two from obtaining further financing and save the property from foreclosure. …
In rendering its decision, the Court relied on not only the “drastically different balance owed” as stated in the two notices, but also the timing of the general contractor’s second notice of contract in that it was only filed after owner’s counsel represented that it intended to bond off the lien so the owner could proceed with the project. In considering such factors, the Court concluded that there was sufficient information and evidence to find that the general contractor’s second notice of contract was willfully and knowingly inaccurate, and dissolved, in full, the general contractor’s second notice of contract and statement of account.
The Court’s unique decision in Artizan General Construction Inc., should serve as a warning to contractors, subcontractors, and suppliers filing a mechanic’s lien claim that if it is intentionally or willfully overstated, it stands the risk of being summarily dissolved by the court, and offers a good reminder about the importance of being able to back up payment claims with supporting project documentation. Conversely, for property owners, the decision provides support for requests that mechanic’s lien be discharged when the facts suggest that a lien was willfully and knowingly overstated.
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