When Catastrophe Strikes

This week scores of homes in Andover, Lawrence and North Andover were damaged or destroyed in a bizarre series of gas explosions.  Now that the emergency has passed those whose homes were involved are left the reality that their lives have been turned upside down.

As folks start to sort through the situation, here are our thoughts from a legal perspective.

1. If you own your property, call your insurance company.  If you don't remember your insurance company's name and your paperwork is lost, destroyed, or inaccessible, call your insurance agent.  They can help you make the claim.  You can do this by phone, but you'll want to follow up and put the notification in writing.  It does not have to be anything formal, an email will do, but you should have a paper trail.  Even if your home was not harmed, but you had to be evacuated, you may want to check with your homeowner's policy.  You may have coverage for things like hotel stays, meals and the like.

2. If you rent your property and had renter's insurance, be in touch with your renter's insurance company.

3.  Make a claim with Columbia Gas.  Beginning Sunday, September 16, it will be at the Lawrence Public Library everyday from 8am-5pm.

4. People may show up at your property and get you to sign on with them.  Who are these people?  Public insurance adjusters, general contractors, demolition people and others.  DO NOT sign with these folks, at least not yet.  You may need some or all of these tradespeople to help you, but don't just sign with the first person who shows up on your lawn.  Get references from friends, family, and co-workers.  Take the time to investigate each person just as you would if you planned to do a home renovation.

5.  As mentioned above, your insurance should cover living expenses while your home is being repaired or rebuilt.  Check into your coverage as soon as you can with your insurance company so you can find a suitable place to rent.  In the meantime, keep all your receipts for reimbursement.

6.  A public insurance adjuster can be a real help if you feel that your insurance company is not adequately compensating you for your losses.  However, you may not need such a person in this case.  First, if your insurance company is going to pay you your whole policy, then you don't need to pay someone to fight for you.  You are getting the entire value of what you'd be entitled to.  Second, depending on how Columbia Gas handles the situation, your insurance company may end up being minimally involved.  If you do choose to hire one, make sure they are licensed and have good references.

7.  When you renovate a home, you must bring the home up to the current building code.  Here in Massachusetts, most homes that undergo any renovation, planned or otherwise, must have code upgrades.  Code upgrades are covered by separate provisions in your policy over and above the policy amount.  Typically, that amount is 10% of the policy amount, but you'll need to check your policy as the percentage does vary.  In other words, if you have a policy valued at $350,000, and your code upgrade is 10%, you then have $35,000 for code upgrades.

8.  Knowing and understanding how your policy works is critical.  Knowing how any contractor that you plan to hire works is also critical.  Give serious thought to having a lawyer review any contract you plan to enter, especially one with a general contractor.  You can read about considerations of hiring a contractor in an earlier blog post.  Before you sign any contract for renovation or repair work,  you MUST have a clear understanding of the scope of the work.  Are code upgrades included in the price you have been given?  Many times they are not and homeowners are caught off guard when they learn that the property must be re-wired and that the electrical cost provided in the quote by the contractor does not include this work.

9.  If your home is not completely destroyed, take photographs and videos to document your possessions.  You will need to come up with a list of items so you can be reimbursed for your lost personal property.  If, unfortunately, your home was completely destroyed.  Go through your home, room by room and visualize what was in your home and make a list.  Ask others who might have photos or who frequent your home to help you out.

10.  Don't hesitate to get emotional and mental health support.  What happened this week in the Merrimack Valley was traumatic.  Even if you were not physically injured, there may be a psychological impact on you and/or your loved ones. 

Insurance Claims and Code Upgrades

    When you have a catastrophic event at your home and you have insurance, one of your thoughts might be thank goodness I have insurance. And it is good that you have insurance.  But, the question quickly arises as to what the insurance will coverage.  What insurance covers and what it does not is a pretty confusing question and often depends on what riders you have.

     When your house has damage, say, from a fire, all the repairs have to be done to the current code.  In other words, if your home had electrical wiring from 1968 and it was damaged in the fire, then all the electrical must be brought up to current code.  Insurance policies in Massachusetts traditionally provide code upgrades up to to 10% of the policy.  If you have a $500,000 policy, then the insurance company will pay $50,000 towards code upgrades.  

     A catastrophe is a time of great stress.  You may find that insurance adjusters and/or contractors show up at the fire to try to get you to sign with them.  Do not sign with anyone on the day of the fire.  If your home is a total loss, then you probably don't need an adjuster, you are going to get the whole of the policy.  You don't need anyone to advocate for you and take 10% of your proceeds.  In any event, do not sign any documents the day of the fire.  Take a little bit of time to take a deep breath and take stock.  I promise you, adjusters will be happy to help you, if you decide you need them a few days later.

     When meeting with contractors, find out whether code upgrades are included in the contract price or not.  If they are not included in the price, then secure estimates for the cost of those upgrades before signing with the contractor.  Also, check the scope of the work carefully.  If your contract is tied to the insurance adjuster's scope of work, you may find that certain things are excluded from the scope of the work because the adjuster did not note the issue.  For example, if the insurance company deems that just one wall of your living room needs painting, then double check to see if the quote from the contractor provides for a fresh coat of paint for the whole room or just that one wall.  If that fourth wall is not included, then you will either not get it painted or you will pay extra for it.

     Sometimes, a contractor can swap out something the insurance will pay for, for an upgrade or something you want done, that is not covered by the insurance money.  If you plan on doing some "while we're at it" changes, be clear with the contractor as to the cost. If you are foregoing something called for in the insurance adjuster's report, then make sure all the changes are in writing.

     Finally, just because you receive funds from the insurance company, that does not mean the contract is entitled to them.  Similarly, just because the insurance company says something needs to be fixed that does not mean that your contractor is obligated to do that work.  Review all documents carefully.  Understand the scope of the work included and understand what unknowns might possibly arise during the work.  If you have questions or are unsure, ask questions and consider consulting with an attorney before you sign the contract.



   



   

Requirements for a Home Improvement Contract

As we have posted before, when you undertake a home improvement project -- a renovation, an addition, finishing a basement -- the contract between the homeowner and the contractor is likely covered by Chapter 142A.  Chapter 142A has some specific requirements for contracts.  In this post, we are going to focus on the requirement that the contract include a detailed description of the work to be performed and the materials to be used.

What does that mean?  It means that the contractor must tell you exactly what materials he or she plans to use.  For example, the contract should specify the brand of paint and the specific product line - Benjamin Moore paint, Aura line or Sherwin Williams paint, ProMar 200 line (the listing of any product or brand is not an endorsement, merely exemplary).   The contract should not just specify the finishes, but also the materials that you won't see, like insulation. You should know the R value -- the higher the R value the better an insulator -- of the insulation, whether a water/vapor barrier, like Tyvek is being used on your project.  When a contract complies with this statutory requirement, the contractor can properly estimate the cost and the homeowner can understand exactly what they are getting.  If the contract specifies American Standard bathroom fixtures, then there will not be a misunderstanding about what type of faucet was installed. If the homeowner wants Kohler faucets, they must speak up and work out any price differential with the contractor.  At the same time, the contractor can provide an allowance based on that specification and kept its costs managed.  In short - the more detail the better.  It minimizes misunderstandings about what is being done and used on the project.

The detail required for the scope of the work is no different.  The requirement is for the benefit of both sides. The homeowner should know, for example, whether interior walls are being insulated. If they are, then the contractor must calculate that into its costs as it prices the job.  If the scope of work does not include such an entry, then the homeowner can ask about it and tell the contractor that they want the insulation to reduce noise.

The lack of details and hence, misunderstanding from the start of the job.  By complying with the law, both sides are protected and understand what is being provided.

Chapter 142A -- the Home Improvement Contractor Act

     Massachusetts requires contractors who perform home renovation work not only to have a Construction Supervisor License, but also require him or her to have a Home Improvement Contractor Registration under Chapter 142A.  The Home Improvement Contractor registration is only required for contractors who do renovation work -- additions, renovations, demolitions -- changes to the existing structure.  It does not apply to new construction work.

     If you knock down your home and build a whole new one, you do not get the benefit of Chapter 142A.

    Why does this matter?  Chapter 142A provides for a guaranty fund that reimburses homeowners up to $10,000 when they succeed on a claim against their contractor.  Further, a violation of Chapter 142A is an automatic unfair or deceptive act or practice under our consumer protection statute, Chapter 93A.  If your construction work does not fall under Chapter 142A, you can still have a Chapter 93A claim, it is just not automatic.

     And why does Chapter 93A matter?  Chapter 93A is a fee shifting statute.  In other words, a plaintiff successful under Chapter 93A is entitled to an award of attorney's fees to be paid by the contractor.  If the contractor's unfair or deceptive acts or practices are knowing or willful, then the court can award double or treble damages.

     For example, a contractor who violates the building code, while doing renovation work has violated Chapter 142A and therefore the consumer protection act.  For new construction, this connection is not automatic.

     If you run into a problem while your doing construction work, be certain to look at Chapter 142A and see if it applies to your construction work.  

Hiring a home improvement contractor

     It is that time of year -- the "for sale" signs are up, and the crocuses will be up soon.  As we joke in our family, very shortly, the for sale sign comes down and the dumpster appears in the driveway and the building permit in the window.  Whether you are buying a new home and renovating or sprucing up the house you have, here are some things to consider before you let a contractor do work on your house.

• Contractors in Massachusetts should have both a home improvement contractor registration and a construction supervisor license.  Make sure your contractor has both.
• Ask friends, family, colleagues, and neighbors for referrals. Receiving a referral from someone you know is often the best way to find the best person to do the job.  But don't rely solely on the referral.  Do your homework.  
• Make sure that the contractor can do the job for you.  In other words, if the contractor mostly renovates kitchen, he may not be the right person to bump out that dormer on the second floor.
• Ask the contractor for the names of the last 3 projects he has completed or is presently working on. Also, ask to visit one or more of his current work sites.  If a contractor will only give you references make sure that the projects were completed in the last year.
• Find out what kind of insurance your contractor has.  Keep in mind that it is rare that a contractor has insurance that will pay you for a claim that the contractor was negligent.  Most policies exclude poor workmanship from coverage.
• Make sure you have a contract in writing and that the contract includes basic items like payment terms, termination, and language required by Massachusetts law.  

93A and Building Code Violations

Last week, the SJC ruled on the Klairmont v. Gainsboro Restaurant case and decided for the first time that a violation of the building code can, in some circumstances, constitute a violation of Chapter 93A.

The case involved the death of a Northeastern University college student in 2007.  He had left the defendant bar to take a call on his cell phone and ducked into the stairwell of the basement of the bar. There, with no door to the basement and no landing, he tumbled backwards down the stairs and later died from his injuries.  The decedent's parents brought suit against the bar on claims of wrongful death and violations of Chapter 93A.  The bar had never obtained a  building permit for the work it performed on the basement stairs.

Affirming the superior court decision, the SJC found that the building code violations did, in this instance constitute a violation of 940 CMR 3:16.  Had the bar obtained a building permit, the bar would have been required to install a door at the top of the stairs, rather than using the vinyl strips it had in place, a landing would have been required and handrails and lighting would also have been installed.  In short, had a permit been obtained the building code followed, it is likely the decedent would not have been been able to access the basement, let alone fall down a flight of stairs.

What makes this case important in the realm of home improvement contractor law is that to date, neither the SJC, nor the Appeals Court has found that a violation of the building code, by itself constitutes a 93A violation.  Those Courts have upheld numerous decisions under Chapter 142A, the home improvement contractor statute.  However, Chapter 142A only applies to home renovation projects and does not apply to new construction.

There is still a disconnect between Chapter 142A for renovations and new construction.  For renovations, a violation of the building code is a per se unfair or deceptive act or practice.  For new construction, even after this case, 93A liability is not automatic.

The Dangers of Not Doing Your Homework When Hiring a Home Improvement Contractor

Kyle Buckminster of South Grafton was recently ordered to pay $111,000 in restitution, along with $35,000 in civil penalties, and $12,600 in fees based upon four consumer complaints to the Office of Consumer Affairs and Business Regulations ("OCABR") by consumers who complained that Buckminster failed to comply with home improvement contracts and failed to finish the work contracted.  Buckminster's home improvement contractor license was revoked nearly 13 years ago, according to Attorney General Martha Coakley.  Buckminster allegedly operated under numerous business names throughout the last several years.

When hiring a home improvement contractor a homeowner should be sure to do his or her homework regarding the qualifications and reputation of the contractor, including checking that the contractor holds the necessary licenses in Massachusetts.  In Massachusetts, home improvement contractors are required to register with OCABR.  A searchable database of all registered home improvement contractors is located here and gives valuable information on whether any complaints have ever been filed against the contractor.

The fate of the homeowners damaged by Buckminster may have been different if they had done a simple search on OCABR's database.  We recommend that if you are checking out a contractor, don't just search on the registration number the contractor gives you.  Unfortunately, we are aware of instances where contractors have had judgments against them and been able to obtain a new number.  Make sure you search on both the name and number.  The database can be searched by the home improvement contractor number or the name of the contractor.  When searching on a contractor, the owner's name should also be searchable with the OCABR.  If your contractor is missing from this database or has a license listed as revoked or lapsed, then proceed with caution.  Quick, easy homework can save you a long, arduous journey later.

Building Permits, Who Needs Them?

     The answer is:  You do.  And by "you" I mean both the homeowner and the contractor.

     Sometimes, I run into the situation where someone, either the homeowner or the contractor, is suggesting that the work should be performed without obtaining the appropriate  permits from the city or town.  This is a bad idea, regardless of whether you are the homeowner or the contractor. 

     If you are the homeowner, a contractor must pull a permit, otherwise, you will be ineligible for the guaranty fund available through the Office of Consumer Affairs.  Having a building permit, also ensures that someone will come and look at the work performed, at least in a cursory fashion.  Now, a word of warning here.  Homeowners must understand that the inspectors who come to your house from the town are not guarantors of the work the contractor performed.  They are not going to spend three hours at your house looking at every nook and cranny to make sure that the work was done in a good and workmanlike manner.  By the same token, contractors must understand that just because an inspector signs the building permit, the inspector is not signing off on your work that it was performed correctly.

     So, aside from the guaranty fund, why else do you need one?  It is the law and if you do not get one and the town or city in which you reside finds out, they can make you get one retroactively, charge you a penalty or in some circumstances make you undo that which you did.  The building inspector looks at the project while the homeowner’s walls are open and can check the framing  to make sure that the building is not going to fall down.  If you are a contractor, you want to insist on the permit for similar reasons.  It is the law and if the project goes bad down the road and you do not have a permit, you can bet that the homeowner (or their counsel) will make a big deal out of the fact that there is no permit.

Hurricane Sandy and Repairs

     Massachusetts came through Hurricane Sandy relatively unscathed in comparison to New York and New Jersey.  However, many people have sustained damage and need repairs.  Contractors in Massachusetts who are performing renovations on one to four family homes must be registered with the Office of Consumer Affairs under Mass.Gen.L. ch. 142A  In a post I wrote earlier this year, I discussed how to select a contractor.  As I detailed there, you should check references, check the Office of Consumer Affairs website and the Department of Public Safety for the contractor's licenses.  The law requires that contractors follow a number of rules regarding payment, requirements in your contract and that the work must be performed according to the Massachusetts Building Code.

    Once you find a contractor you want to hire, make sure that your contract clearly states the work to be performed, the materials to be used, the payment schedule and provisions for termination.  You should seriously consider having a lawyer take a look at the contract.  While it will cost you money up front, the cost of a few hours of a lawyer's time to review the contract up front is very small in comparison to what you will spend if you have to litigate the matter.

   

Paying the Contractor and the Law

When you decide to hire a home improvement contractor, of course, he or she needs to get paid.  Massachusetts law Chapter 142A says several things about payment:

1.  A contractor cannot ask for more than 1/3 up front, unless there are special order items involved;
2.  A contractor cannot demand final payment until the project is completed to the mutual satisfaction of the parties;
3.  The contract must be in writing if it is in excess of $1,000 and must state the total amount agreed to be paid for the work performed; and
4. The contract must list a schedule of payments.

When you decide to undertake a home improvement project, make sure that your payment schedule is clear.  It may be a good idea to tie payments to completion milestones, such as when the framing is done or the floors installed.  Payments tied to a percentage completion can be murky and subject to disagreement. 

Make sure you are comfortable with the payment terms before you sign on the dotted line.

10 Years and Counting . . .

Ten years ago today, Tanowitz Law Office, was born.  In the past decade, the firm has grown from one person to three and we have moved offices 3 times.  Then years ago, I had a three year old and a three month old.  Now I have -- gasp -- a thirteen year old, a ten year old and as a bonus a nearly eight year old.  We look forward to many more years of helping people in the areas of home improvement disputes, landlord tenant issues, commercial collections and general business litigation.

How to Pick the Right Home Improvement Contractor

While winter is still upon us (despite the mild weather), now is the time when many people are planning a warm weather renovation.  If you fall into this category, before you hire a home improvement contractor, here are some things to think about before you sign on the dotted line.

• First, ask friends, family, colleagues, and neighbors for referrals. Receiving a referral from someone you know is often the best way to find the best person to do the job.
• Once you receive the referrals do not accept them without doing your own homework.  If your neighbor needed her half-bath redone and you want to add a huge addition, her contractor may not be the right one for you.  Some contractors specialize and you don't want to hire a kitchen and bath person if you plan on gutting the interior of your home.
• Don't just ask for references from the contractor. Rather, ask the contractor for the names of the last 3 projects he has completed or is presently working on. Also, ask to visit one or more of his current work sites. 
• Make sure your contractor is registered and licensed as a construction supervisor. A construction supervisor is licensed by the state and is required to take an examination.  Making sure your contractor is a registered HIC is the first step to being able to collect from a guaranty fund set up by the Commonwealth.  
• Make sure your contractor has insurance—worker’s compensation and comprehensive general liability for certain and errors and omissions if your contractor can find such a policy.  You may want to consider finding out whether you can purchase a rider to your own policy for a nominal cost. That way, if something goes wrong you will at least be reimbursed. The insurance companies can then fight out who ultimately pays the claim, not you.
• Seriously consider having a lawyer draft or review a contract for you.  There are many provisions which should be included and others which must be included as a matter of law.  

You can hear me talk more about hiring a home improvement contractor on March 29 at 7 pm at my office.  You can sign up here:  http://www.eventbrite.com/myevent?eid=2943609415

Silence may be Golden

At the end of my last post, I mentioned that an owner should be careful about what s/he says to the subcontractor who is not being paid by the general contractor. My warning is based on two cases which the Massachusetts Appeals Court decided, one in September 2007 and one in January 2008. In both instances, the court found that the owner was liable for payments to the subcontractor based on representations and promises that the owner had made to the subcontractor.

In Central Ceilings, Inc. v. National Amusements, Inc., 70 Mass.App.Ct. 172 (2007), a project to build a movie theater had come to a virtual standstill due to lack of funds. At that point, the owner told the plaintiff subcontractor that the owner would pay the subcontractor if the general contractor did not. It further told the subcontractor that it needed the project done prior to Labor Day Weekend so that it could benefit from the higher movie sales that occurred on a holiday weekend. Based on the owner’s representations, the subcontractor continued with the work and completed it in a timely manner. When the subcontractor wasn’t paid, it sued the owner seeking payment; the owner denied liability. The court found that the subcontractor had been promised payment by the owner directly, and that even though the promise was oral, it was binding on the owner.

In Mike Glynn & Company v. Hy-Brasil Restaurants, Inc., 75 Mass.App.Ct. 322 (2009), the Appeals Court made a similar determination. In that case, the subcontractor and the owner of the property had been long-time friends. When the property manager ran out of funds and Glynn threatened to cease work, the owner of the property promised that he or his company would pay if the property manager did not. Like National Amusements, supra, the owner in this case insisted that the restaurant open prior to Thanksgiving. In reliance on the owner’s promise, Glynn worked over-time, incurred extra expenses by hiring additional men to work on the job. When Glynn sought payment from the property manager and was not paid, he sued the owner and the owner’s company directly. In dicta, the Appeals Court found that the facts of this case fell outside the “not ordinarily liable” rule set forth in Evans v. Multicon.
Both Mike Glynn and National Amusements are close to the hypothetical scenario that the Evans case had envisioned and therefore, it is not surprising that the Court allowed the plaintiff subcontractors to collect from the property owner. However, the timing of the promise is critical. In Rosano-Davis, Inc. v. Sastre, 2004 Mass.App.Div. 55 (2004), aff’d 65 Mass.App.Ct. 1110 (2005) (unpublished), the subcontractor argued that the owner of the property had promised to pay the subcontractor if the general contractor did not. The Appeals Court ruled that because the owner made promises to pay after the work was completed, the subcontractor did not rely on those promises to finish the work.

In the case I litigated that I discussed in my previous blog post, there were similar allegations. The subcontractor argued that the owner of the property had made promises to pay, however those promises if they were made at all (a fact my client disputes) they were not made until after the work was complete. Therefore, any argument that there was some reliance did not carry the day.

So what is an owner to do if they learn that the general contractor has not been paying the subcontractors? Do should the owner speak to the subcontractors or do you remain silent? There are several steps that must be taken. First, assess the situation. Compare the progress of the project to the payments made and determine whether the owner has paid more to the contractor than the value of the work. Or perhaps the opposite is true. Or maybe the owner and the contractor are about even when one compares the work performed and the amount paid. Consider the project and its progress. If the property is not weather-tight or exposed to the elements, then you may need to have the contractor continue. Speak to the general contractor and the subcontractors and find out everybody’s story. Don’t make any promises to anyone. Just listen. Then the owner will have to make some decisions.

If the owner and general are approximately equal in work performed and money paid or if the owner owes the general money, then the owner can make an arrangement to pay subcontractors directly. The owner can write joint checks to the general contractor and the subcontractor so that the subcontractor receives payment.
It is more difficult when the general contractor holds more money than the value of the work performed. If the owner pays the subcontractor, s/he runs the risk of paying twice; once to the general and once to the subcontractor. If the general is going to continue with the work, one might want to try to negotiate an arrangement to pay the subcontractors directly as a credit to future payments. As you can see this gets very complicated, not only in terms of determining who you should pay and when but obviously one has to deal with the personalities of the individuals involved.

Whatever the end result, put it in writing and have all the parties sign and/or acknowledge receipt. It is best if the parties can resolve the issue so that the general can continue work. In reality, it is often hard to find a new contractor willing to come in the middle of a job. Consider involving an attorney to negotiate a resolution. While it might cost the owner some out of pocket expense, the cost will be negligible in comparison to litigation costs.

In my final post, I will discuss the actual mechanics of the mechanic’s lien. As I mentioned in my first post on this subject in order to perfect the mechanic’s lien one has to take a number of steps. The last step that must be taken is the filing of a lawsuit. Whether you can actually collect even if you take all those steps and how you collect at the end of the lawsuit will be the subject of my final post on mechanic’s liens.

Mechanic's Liens Part 2 -- "Not Ordinarily Liable"

In my last post, I tried to define and explain mechanic's liens through frequently asked questions. A mechanic's lien, when properly done, allows a person who has done work on your house to put a lien on your house to secure payment. This mechanism to secure payment is not as important for a general contractor performing work on a property, as it can also sue for breach of contract and make other claims against the property owner. However, for a subcontractor, a mechanic's lien is generally the sole mechanism by which a subcontractor can recover against an owner, when that subcontractor does not get paid by the general contractor.

Prior to the enactment of the mechanic's lien law, a subcontractor who provided labor and materials generally had no right to recover from the property owner. The mechanic’s lien law changed the the common law. However, it is the sole mechanism for a subcontractor to recover from the owner but only if the subcontractor strictly adheres to the mechanic’s lien law.

Let me give you an example from a case I handled last year. I represented the owner of a commercial property where it contracted with a general contracting company to build a shopping center. The project was plagued with problems, and the general contractor essentially abandoned the job after the owner passed away. The owner had paid the general contractor quite a bit of money. Unfortunately, the general contractor had not paid all of its sub-contractors.

Many of the sub-contractors recorded mechanic's liens, but at least one did not. This particular subcontractor brought a lawsuit against the owner seeking to recover on claims of breach of contract, goods sold and delivered and quantum meruit. Unfortunately for the subcontractor, the general contractor had failed to pay it more than $150,000.00 for labor and materials. The last two claims are equity claims whereby a party asks to be compensated the fair value of its work so that the other party does not obtain a benefit for free. The breach of contract claim was dismissed at the outset because there was no contractual relationship between the property owner and the subcontractor. The goods sold and delivered and the quantum meruit claim remained.

The issue that remained was based on language from a 1991 Massachusetts Appeals Court decision. In Evans v. Multicon Constr. Corp., the Appeals Court ruled that without a lien perfected under G.L. 254, an owner who enters into a general contract for improvements on real property is “not ordinarily liable” to subcontractors whose sole contractual arrangements are with the general contractor. If a subcontractor does not follow the mechanic's lien law, it is barred from recovery, regardless of the theory. In other words, unless there was some circumstance that was out of the ordinary, without a perfected mechanic's lien, the subcontractor could not collect from the property owner.

The subcontractor vigorously claimed that the facts in our case were so unusual that this was not an ordinary case and the “not ordinarily liable” rule should not apply. I, on behalf of the owner, argued that this case was simply the all too familiar scenario of a general contractor who went out of business and did not pay subcontractors. The court agreed with the owner and the subcontractor lost. The subcontractor did obtain a judgment against the general contractor, but the chances of collection are very slim given the facts.

There are several lessons to take away from this case. First, if you are a subcontractor, consider making it a regular practice to record a Notice of Contract one every job. I am told that many general contractors do not like when this is done. However, the mechanic's lien law voids any provision in a contract that prohibits a contractor from taking steps to enforce a lien. Mass.Gen.L. ch. 254 § 32. However, what the statute says and reality may not match. In the event, it is not realistic to record a notice of contract for every job, then be mindful of payments or lack of payments. If you have finished a job and have not gotten paid, then you must take steps to protect your interests. Under the mechanic's lien law, you have 90 days once work stops at the site to record your notice of contract. If you are at the beginning of a project, you have a lot of time; if you are at the end of the project, the timing could be trickier.

Second, if you are an owner, keep track of the amount of work being down and the amount of payment being requested. As stated in my last post – you must control the money. That rule is critical regardless of whether the work is residential or commercial. If you hear subcontractors on your job are not being paid, consult legal counsel immediately. The issues are complicated and something you say or do can come back and haunt you later, including promises to pay subcontractors directly.

How, you ask? That will be subject of my next post.

Mechanic's Liens -- Part 1

It is easiest to discuss the basics of mechanic's liens via Frequently Asked Questions. I hope this answers some of basic questions about mechanic's liens. Over the next few posts, I will discuss a series of issues relating to mechanic's liens in Massachusetts. Mechanic's liens are state specific, so if the property where the work was performed is not in Massachusetts, you will need to consult a different state's laws.


What is a mechanic's lien? In Massachusetts, a person who provides labor or performs work as a general contractor or subcontractor (or subcontractor for the subcontractor) can take steps to perfect a lien on the property where the work was performed. With respect to subcontactors, the mechanic's lien law provides a critical exception to the general rule that a subcontractor cannot usually collect from the owner of the property when the contract for the work runs between the property owner and the general contractor. The steps that must be taken to perfect a mechanic's lien are different depending on whether that person was the general contractor, the subcontractor or a laborer. The laws regarding mechanic's liens can be found at Massachusetts General Laws, Chapter 254 sec. 1 and following.

Why would I file a mechanic's lien? A person or entity that performs work on someone's property may want to file a mechanic's lien to help ensure payment. If the contractor is not paid by the person who hired them, the owner of the property where the work was performed could be obligated to pay the contractor, even if there is no direct contract between them. As mentioned above, it is generally the only way that a subcontractor can collect an unpaid bill from the property owner.

What do you need to file a mechanic's lien? A perfected mechanic's lien is not just one piece of paper recorded at the registry of deeds. A contractor must take numerous steps before the lien is perfected and the steps vary depending on whether the contractor is a general contractor, a subcontractor or a laborer. In general, there must be a written contract for work to be performed at the property. Then, the contractor must record a Notice of Contract and a Statement of Accounting, with the appropriate registry of deeds. In order to perfect the lien, it will be necessary to file a lawsuit and then record the lawsuit at the registry of deeds. Depending on the applicable section of the statute, there are certain notice provisions which also must be followed. There are also time limitations which must be strictly followed. I strongly recommend that you consult an attorney. It is very easy to make an error in this process and one incorrect step will invalidate the mechanic's lien. If you are a subcontractor, this likely will eliminate your ability to collect from the property owner. If the general contractor with whom you contracted is out of business, a perfected mechanic's lien is likely the only way you can collect payment.

As the owner of the property, can I be responsible to pay a subcontractor, if my general contractor does not? Yes, you can under certain circumstances.

As the owner of the property, how do I prevent being responsible to pay subcontractors that my general contractor is supposed to pay? There are a number of things you can do. First, and probably most importantly, the homeowner MUST keep control of the money. I cannot say this enough. Do not let the contractor get too far ahead of you on the money. What do I mean by this? If your project costs $50,000.00, then you should make sure your contractor has received approximately $12,500 when the project is 25% complete and so on. If your project is only one-half done and you have paid your contractor 75% of the money, you are asking for trouble. Second, you can require that all contractors who worked on your project sign mechanic's lien releases be signed before releasing each payment to the contractor. Third, you can write joint checks to the subcontractor and general for payment. Finally, homeowners should strongly consider consulting an attorney prior to starting any construction project.

I hope this covers some general questions on mechanic's liens in Massachusetts. In my next post, I will focus on the importance of mechanic's liens for subcontractors. In the meantime, if you have specific questions, please feel free to comment or email me directly.