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Sometimes, a claimant’s mechanic lien is just one of many inscriptions placed upon a property. There may be additional construction liens (filed both before and after yours), a construction loan, a bank’s mortgage, and others. When you’re looking to use the lien procedures to get paid, all of these inscriptions begs this question: who gets paid first?
A mechanic lien is a great collection tool because it gives the claimant an actual privilege in the property itself. This privilege acts a lot like a bank’s mortgage. In every case across the country, so long as the property has sufficient equity, the mechanic lien will off some security.
But what about those times when the property doesn’t have equity? Too frequently, banks step into the construction fold and loan enough money on the property to render your mechanic practically worthless. Of course, this is only the case when a bank’s mortgage has priority over a mechanic lien.
Depending on where you are, that’s not always the case. A recent decision from the Superior Court of Connecticut gives an example of when a mechanic lien can prevail over a bank’s mortgage (McGhee-Fichtner v. Kusek).
In many states, like Connecticut, the mechanic lien privilege actually attaches that the time the labor or materials are furnished to the property. In this circumstances, the lien’s filing only cements the privilege already acquired. This is distinguished from states where the mechanic lien privilege attaches only after the lien’s filing.
This can make a big difference when comparing the mechanic lien privilege against the bank’s mortgage.
Again, however, the mechanic lien laws are quite peculiar when setting priority. Every state is different, but the Connecticut court’s recent decision is a good demonstration of the types of issues that may arise when determining priority nationwide…and especially an issue that arises in the context of Connecticut.
In short, the mechanic lien attaches in CT when the materials and/or labor are delivered to the project. Off-site work (planning, off-site manufacturing, etc.) all will not contribute to have the privilege attach in CT. In CT, even the smallest amount of work/materials furnished to the project will give rise to the lien attaching. The CT court explains the distinction:
[T]he foundational concept underpinning the mechanic’s lien statute is one of notice â€¤ An encumbrancer is chargeable with notice of materials furnished or services rendered that have some form of visible impact on the property. â€‚ Something more than merely preparatory off-premises work is required â€¤ Most jurisdictions have held that, to have priority, the work must be of such a nature as to be reasonably apparent upon inspection â€¤ The mechanic’s lien statute contemplates reasonable notice, not extraordinary investigation.” â€‚ (Citations omitted, internal quotation marks omitted.) â€‚Calabrese Development Corp. v. Carpinella, Superior Court, judicial district of Waterbury, Docket No. CV 91 0090341 (June 16, 1992, Blue, J.) (7 Conn. L. Rptr. 657, 660).
In the present case, the materials furnished and the services rendered by the plaintiff before the defendant filed its mortgage involved the plaintiff holding multiple telephone conferences, reviewing cost figures and delivering a generator, skidster, gasoline and diesel fuel to the property. â€‚ It is clear that the telephone conferences and cost reviews constitute preparatory off-premises work. â€‚ Unlike the lienor in Calabrese, however, the plaintiff also delivered equipment and fuel to the premises, which had a visible impact on the property that could be reasonably apparent upon inspection.
Thanks to A Connecticut Law Blog for posting about the decision and bringing it to our attention.