Leased Property and the Mechanic’s Lien Conundrum.

By Kevin G. Collimore, Esq.

It is a common scenario confronted by contractors:  the prospective client wants to renovate a building it is leasing. The scenario can leave the contractor unprotected if it does not take required steps before stepping foot onto the project.  

New Hampshire law provides contractors a powerful tool to ensure they are paid for property they improve:  the mechanics’ lien.  When timely asserted, a mechanics’ lien provides the contractor a lien on the property that takes priority over many other types of liens, even if those other liens are filed before the mechanics’ lien.  A properly secured mechanics’ lien can often make the difference between a contractor getting paid on a project and, well, getting stiffed.  The problem is that New Hampshire law is fussy about how a mechanics’ lien is perfected, and that is especially true if the contractor is hired by a tenant and not the land owner.   

Take the following example, drawn from a recent success at CullenCollimore:  a couple rented a home from the wife’s father and hired a contractor to renovate it.  Among the planned renovations was the addition of living space for the father, who was advancing in years and needed assistance.  The couple wanted the renovations to be a surprise when the father visited for Thanksgiving, so the father knew nothing of the renovations or the contractor working on his property.   

When a payment dispute arose between the couple and the contractor, the contractor sought to assert a mechanics’ lien against the father’s property.  But was the mechanic’s lien enforceable? 

There are two answers, really.  In general, New Hampshire law permits a contractor to assert a mechanics’ lien on leased property, but only if the contractor notifies the property owner in writing that it intends to assert a mechanics’ lien.  Importantly, the notice must be delivered before the contractor begins work.  As for the dispute between the couple and the contractor, the trial court dissolved the mechanics’ lien it initially granted on the father’s property because the contractor failed to provide the written notice before starting the renovations. 

This outcome is a reminder about the importance of strict adherence to the statutory requirements for perfecting a mechanics’ liens.  It also highlights a conundrum for contractors.  No contractor starts a project believing it will end in a payment dispute, and few are willing to risk good relations at the start of a project by sending written notice threatening a mechanics’ lien.   Yet advance notice is precisely what is needed to protect the contractor’s mechanics’ lien right.  

CullenCollimore is a law firm that offers litigation and business services in New Hampshire and Massachusetts.  Visit us as cullencollimore.com.