Eaton Peabody

Using the mechanics’ lien law can be an effective tool for subcontractors and suppliers for collecting payment and for proactively managing credit. This article will describe the mechanics’ lien statutes of Maine and how subcontractors and suppliers can and should use the mechanics’ lien laws. more


The priority of liens on a property often determines which claims get paid. A mechanics’ lien will give a subcontractor or supplier greater security in getting repaid in full. In Maine, the mechanics’ lien is entitled to priority in the same manner as any other lien and will have priority over liens filed subsequent to it. With respect to other competing mechanics liens for the same project, upon a sale of the property subject to liens, payment is made to persons claiming the lien (lienors) on a pro rata basis.

Courts in Maine require strict compliance with the mechanic’s lien statutes in order to maintain perfection. Failure to comply with the letter of the law and the prescribed deadlines will result in the loss of lien rights.

In Maine, a mechanic’s lien may attach to a building but not the land on which it sits if the owner of the building does not also own the land. Similarly, a mechanic’s lien may attach to a wharf or pier, though not necessarily the land on which it sits, when the owner of the wharf or pier does not own the land. In such cases, if the building, wharf, or pier is moved, the lien remains in effect on the property moved.

Like many states, Maine allows a defense of payment. The defense of payment allows the owner of a property to dissolve the lien if they show they have paid a general contractor who, in turn, was supposed to pay the subcontractors. However, the defense of payment does not apply where the materials or labor are for a business, commercial, or industrial purpose unless the owner resides on the premises affected. Subcontractors working on projects where the owner can assert the double payment defense may avoid its application by giving notice to the owner as described below.

Prefiling before construction
In Maine, the mechanics’ lien arises by operation of law when a subcontractor or supplier provides labor or materials on the project. There is no pre-filing requirement.

Lien filing after labor or materials are supplied
The mechanics’ lien is created by operation of law when the services or materials are provided. However, the lien dissolves unless the party claiming the lien files a certificate of lien with the registry of deeds of the county in which the property sits within 90 days of the last supply of labor or materials. It is important to remember when filing in Aroostook County that there are two registries of deeds. All other counties in Maine have just one registry of deeds.

Enforcement
In order to preserve and enforce the mechanics’ lien, a subcontractor or supplier must file a civillawsuit in the county where the liened property is located within 120 days of the last provision of labor or materials.

Defense of Payment & Owner’s responsibility for payment to subcontractors
Under Maine law, an owner cannot claim payment of the general contractor as a defense where the materials or labor are furnished for a business, commercial or industrial purpose unless the owner resides on the premises affected.

Where the project site is non-business, subcontractors can insure that the owner will not be able to assert the defense of payment if they give notice to the owner that they are or will be supplying labor or materials, and that they may claim a lien for their payment. Also, the notice must state at the top:

Under Maine law, your failure to assure that _________ (name of claimant giving notice) is paid before further payment by you to ________(name of contractor) may result in your paying twice.

In all cases, the owner’s liability for payment on non-business property does not exceed the total balance due to the person with whom he has directly contracted. For that reason, the subcontractor or supplier’s recovery is limited to the remaining balance to be paid under the contract.

Priority
Generally speaking, liens on property have priority based on the time they were filed in the registry of deeds. In the case of mechanics’ liens, the lien attaches to the property when the services are first provided. For that reason, a mechanics’ lien is effective as of the date that goods or services are first provided, well before the lien is filed in the registry. Where there are competing mechanics’ liens on the same property arising out of the same project and the amount available upon sale of the property is not sufficient to satisfy all claims, the mechanics’ lienors share in a pro rata distribution. Of course, mechanics’ lienors will not get paid if there is no surplus after payment of claims that are higher in priority. Other liens may take priority over mechanic’s liens even though they arise after the work began and the mechanic’s lien first attached. One example of a higher priority claim is a municipal or federal tax lien.

Bankruptcy
When the property subject to a mechanics’ lien becomes property of a bankruptcy estate, an automatic stay goes into effect with respect to that property. The automatic stay prohibits any creditor, including a subcontractor or supplier, from taking any action to create, perfect, or enforce any lien against property of the estate. The filing of the lien certificate is necessary to prevent the lien from being dissolved. Because the statutes governing mechanics lien law in Maine provide that the lien arises when goods or services are first provided and filing the lien certificate merely prevents dissolution, filing the lien certificate is not an action to create, perfect, or enforce the lien within the prohibition of the automatic stay. However, filing suit to enforce the lien against property of a bankruptcy estate or against an individual in bankruptcy is a violation of the automatic stay because it is an action to enforce thelien. If a lienor enforces the lien by initiating suit in contravention of the automatic stay, the action is invalidated and the lienor may face penalties imposed by the bankruptcy court. The automatic stay does not stay the time periods in which the lienor must take action to perfect its liens, so in order to enforce the lien and maintain perfection of its lien by commencing a civil action as required by statute, the lienor must first obtain relief from the stay from the bankruptcy court.

Sale or Foreclosure of Property
The priority of liens on real property determines whether or not the liens survive foreclosure. Upon foreclosure by any lien holder, the inferior liens are eliminated and have no security interest in the property. All liens that are prior will survive the foreclosure. A purchaser at a foreclosure sale takes the property subject to liens superior to that held by the foreclosing party. Mechanic’s liens in Maine arise when services or goods are first provided to the property. For that reason, the lien attaches before the certificate of lien is filed and before a purchaser may have constructive notice of the lien through a filing with the registry of deeds. Where the property is sold while the subcontractor has begun work but before the lien certificate must be filed, the purchaser of theproperty is subject to the lien only if the lienor filed a certificate of lien with the registry of deeds. If a potential lienor has reason to believe that the property may be sold prior to their completing work, they should file a lien certificate to preserve their lien rights in the event of a sale to a bona fide purchaser. The lien certificate will be effective against the property even if it is sold.

Subdivisions and utility improvements
Maine has no special provisions governing the mechanics’ lien in the subdivision or utility improvement context. The statute states that anyone who performs labor or furnishes labor or materials used in erecting, altering, moving or repairing a building, wharf, or pier, has a lien thereon and on the land on which it stands. For this reason, the mechanics’ lien attaches to the interest of the owner of the land benefited by the services or products provided. In the case of a condominium building, the mechanics’ lien will attach to the owners of all units and common areas so long as the work was performed or the goods provided by virtue of a contract with or by consent of the owner.

Renovation or repair work
The applicability of the mechanics’ lien in Maine is broadly construed and applies equally to all eligible work done on a property. The statute specifically includes erecting, altering, moving or repairing any building or constructing, altering or repairing a wharf or pier and includes the surveying, clearing, grading, draining, excavating, or landscaping the ground adjacent to and upon which any such objects are constructed. The mechanics’ lien is therefore available in full measure to anyone who provides virtually any service or materials in constructing, renovating, or repairing a building.

Tenant Work
The mechanics’ lien only applies to work done by virtue of a contract with or by consent of the owner. Where the tenant of a property orders the work, the lien may only be effective if the lienor can prove the owner consented to the work being done. Under Maine case law, to establish the consent of the owner the lienor must prove knowledge on the part of the owner of the nature and extent of work being performed on the premises, and conduct on the part of the owner justifying the expectation and belief on the part of the subcontractor that the owner had consented. For this reason, work ordered by a tenant and performed without express written consent of the owner leaves a subcontractor at serious risk of having an unenforceable mechanics’ lien.

Leased Equipment / Rentals
The Maine mechanics’ lien applies to rented equipment used on the jobsite and specifically includes repair parts of machines used. Not only can an equipment supplier assert the lien for the equipment supplied, but also for the parts used to repair the equipment used on the site.


Prefiling
Under Maine law, there is no requirement that a subcontractor file any notice prior to starting work. Instead, the lien arises by operation of law when labor is provided or materials are furnished.

Lien Filing & service after labor or materials are supplied

Deadlines
In order to prevent a mechanics’ lien from dissolving, the lienor must file a certificate of the lien in the registry of deeds in the county of the liened property within 90 days after he ceases to labor, furnish materials or perform services. If the lienor has a contract directly with the owner of the property, the lienor is not required to file the lien certificate.

Form
There is no required form for the lien certificate, but certain elements must be included in the document filed with the registry of deeds. These required elements are:


The lien certificate must also be signed and sworn to by the person claiming the lien or their representative. The lien certificate must further be accompanied by the $11.00 recording fee.

The Maine mechanics’ lien law further provides that an inaccuracy in the lien certificate does not automatically void the lien, so long as the liened property and the lien itself can be reasonably recognized. A lien certificate is only invalid if it appears that the lienor willfully claims more than his due.

Filing
The lien certificate must be filed in the registry of deeds in the same county where the liened property is located. The certificate must be accompanied by the $11.00 filing fee, or the registry will refuse to file it and the time for filing may expire.

Service/notice
There is no requirement that a lien notice be served on any affected party. The filing in the registry of deeds is considered constructive notice.

Special problems
Maine case law and statutes recognize that lien certificates should not be invalidated for trifling technicalities in their language. However, the requirement that the lien certificate be filed within 90 days after labor or materials are last furnished is strictly applied and lienors should be careful to timely file the lien certificate. Lienors should also be aware that 90 days does not mean three months. The lienor should count the days between the day last services were performed or materials furnished and be sure to file the lien certificate within the 90 day period.


Deadline
A lienor must file a civil action to enforce his lien within 120 days after the date on which the last services were provided.

Form
The complaint to enforce a mechanics’ lien should explicitly state in the caption that title to real estate is involved. The complaint must also state:


Filing
The action to enforce a mechanics’ lien is a civil action filed in the Superior court or District court in the county or division where the liened property is located.

Service/notice
The complaint to enforce the mechanics’ lien should name as defendants the general contractor responsible for payment of the claim, the owner of the property, and any other persons who may be liable for the amounts claimed. Though there are no specific statutory requirements regarding notice and service, the complaint must be served and notice given according to the rules of civil procedure governing service of complaints in civil actions.

Special problems
Any owner of a building may petition for the release of the mechanics’ lien upon substitution for a bond in such amount and with sureties satisfactory to the lienor. The substitution of a bond for the lien requires either court approval or the consent of the lienor. Of course, the lienor will seldom object to the substitution of their lien for a bond, since a bond is even more likely to be paid than a lien.

Subcontractor and supplier special considerations
Subcontractors, sub-subcontractors, and parties who supply equipment and services for the jobsite are entitled to the lien for goods supplied and services rendered so long as they can prove the services and goods are used in erecting, altering, moving or repairing the building. The same requirements concerning timing of the lien certificate and filing to enforce the lien apply.

Lien waivers
In Maine, a lien waiver in a contract is effective. If a construction contract contains a provision stating that mechanics’ lien rights are waived, a party to that contract cannot thereafter assert a right to a mechanics lien. However, the lien waiver provision is binding on upon the party to the contract and is not binding on sub-subcontractors or material suppliers who are not parties to the contract with the lien waiver provision.

Please contact Matthew S. Raynes, mraynes@eatonpeabody.com, for further information.


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