mediation-clause-and-mechanics-lien

Mediation is a popular topic in construction law circles.  Christopher Hill just recently posted about it on Construction Law Musings (Construction Mediation Works! Even When It Doesn’t), and Seth Smiley did the same on Construction Law Monitor (Mediation is a Great Alternative to Litigation). Full disclosure is that these two cats are both construction mediators, but nevertheless, their message is strong and dead-on.

Mediation, in other words, is a popular topic for good reason. It works. It’s affordable. Insert other great adjectives here.

But can it nullify your mechanics lien rights or otherwise cause you to miss out on a lien or bond claim?  The answer is legally simple, but practically complicated, and all discussed in this article.

Your Mediation Clause Likely Looks Like This – Which Means What To Your Lien Rights?

A lot of construction contracts will include a mediation clause. It’s a clause that’s standard within the American Institute of Architects’ (AIA) popular form contracts, along with other popular form agreements, and the clause looks something like this:

If a dispute arises out of or relates to this contract, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree first to try in good faith to settle the dispute by mediation administered by the American Arbitration Association under its Construction Industry Mediation Procedures before resorting to arbitration, litigation, or some other dispute resolution procedure.

This contract provision and the case law interpreting it is very clear that parties must engage in a mediation before proceeding to arbitration or litigation. But, read the clause again thinking about what impact it may have on your mechanics lien or bond claim rights.

Many attorneys or adversaries will argue that the mediation clause prohibits a party from filing a mechanics lien until after the mediation is concluded. They may cling to the “good faith” language within the provision and assert that if a mechanics lien is filed the party cannot be trying “in good faith to settle the dispute” prior to a dispute resolution procedure. Additionally, some states equate a mechanics lien filing as a litigation initiation device (i.e. in Maryland), which could have obvious implications to such a clause.

if you don’t file your claim before mediation, it’s likely that you won’t have it after mediation.
While it may make practical sense to withhold a lien or bond claim filing until after a mediation fails, the reality is that lien and bond claim deadlines are short and are not extended by mediation proceedings or the agreement of the parties. Accordingly, if you don’t file your claim before mediation, it’s likely that you won’t have it after mediation.

Fortunately, when faced with alternative dispute resolution contract provisions (like a mediation clause), courts have sided with lien claimants. Most courts have concluded that liens and bond claims can be filed when the money is owed, regardless of any agreement to resolve the dispute through mediation or arbitration.

This reasoning even extends to the courts in Maryland where a mechanics lien filing requires the filing of lawsuit.  In a recent case, a Maryland court acknowledged the friction between the lien remedy and a mediation clause, but held that they could be filed parallel to one another because “district courts have inherent, discretionary authority to issue stays in many circumstances, and granting a stay [to the lien litigation] to permit mediation (or to require it) [is appropriate]…[G]ranting a stay to require the parties to mediate is more appropriate than dismissal [of the lien].

Your Mechanics Lien Deadline Is Not Extended By Anything. Ever.

This is discussed loosely in the previous section, but it is worthy of repeating and of its own section: your mechanics lien deadline will not be extended because you have a mediation clause in your contract. In fact, your mechanics lien or bond claim deadlines will not ever be extended by anything. Ever.

the-rules-are-the-rules
When it comes to mechanics lien deadlines – the rules are the rules. Get your lien filed within the statutory deadline and don’t pay attention to any other noise about when your lien may be due. If not, you’ll be staring a judge like this, who will rule against you.

The lien and bond claim laws are complicated and they are almost always subject to a variety of state-specific exception. However, I know of absolutely no state or statute that allows the parties to unilaterally agree to change the lien deadlines. These deadlines are set by the statute and there’s no way to change them.

Mediation and arbitration clauses, or other clauses in your contract that impact when money may be due to you or when you can proceed with litigation, may convince you that a lien filing is legally premature. Your adversary or your adversary’s attorney may even point to these provisions and try to convince you of the same. However, this is a false reading of the contract and the lien laws.

There are multiple articles on this journal about this topic as it relates to many of these provisions. See the following for examples:

Lien Deadlines are the lien deadlines. The rules are the rules. Forget all the other noise about your contract, your situation, and the like, and understand that you have the right to file your mechanics lien or bond claim within the statutory time frame no matter what.