If there’s one rule that remains consistent from state to state, it’s that labor or materials must be incorporated into the project for mechanics lien rights to arise. That is, unless you supply specially fabricated materials (we told you before – every state is different!). When these materials are incorporated into a project, there is little doubt that lien rights are present.
But what happens if there’s a hiccup on the project and the specially fabricated materials never make their way into the improvement?
In some states, mechanics liens may be filed by specially fabricated materials providers even if the materials are never incorporated into the project. As always, different states treat these situations differently, and there’s plenty of grey area.
Editor’s Note: We have a longer version of this post available to read on our Lien Law Alerts blog. For the shorter version, please continue reading. Also, be sure to download our free resource to help you determine whether specially fabricated materials qualify for lien rights in the states where you do business.
What Are Specially Fabricated Materials?
Tell me if you’ve heard this one before – the definition will change from state to state. But generally, specially fabricated materials refer to materials that are not generally suited for use on a different project and not readily adaptable for use elsewhere.
It may be useful to think about building materials on a spectrum. On one end, you have materials that are universal – if there’s a surplus of these materials, they can be easily repurposed on virtually any other project. This might be something like roof shingles or light fixtures. On the opposite end of this spectrum, you have materials that were literally tailored for a unique project. And of course, there is the grey area in the middle.
To sort out material that is not clearly on either end of the spectrum, courts often apply a simple test to determine whether material is considered specially fabricated. This, too is not black and white, as the court will weigh these two factors:
- Were the materials specially ordered and specially fabricated for that specific project?
- Can the produced materials be easily used in other structure?
What Does “Incorporated Into the Project” Mean?
“Incorporated into the project” means that the labor or materials were installed or used in the project. This requirement is consistent from state-to-state. Specially fabricated materials that are used on a project generally do qualify for lien rights protection. However, sometimes specially fabricated materials are ordered (and maybe even delivered), but don’t end up being installed or used in the project. That’s the scenario we’re talking about here – if the specially fabricated materials don’t end getting used, does the material supplier still have a lien right on those materials?
There are 15 states that have specific rules for specially fabricated materials. We have a free resource available to help you determine if specially fabricated materials qualify for lien rights protection in the states where you do business.