Mechanics lien statutes throughout the country are very clear on certain factors. One in particular is you must be contracted with the owner directly or indirectly. Indirect contracting is exemplified through subcontractors, suppliers, etc. Somewhere along the line of your contract chain better be the owner. You need to be acting with the owner’s authority. Why? Because without that authority connection, you legal have no connection to the property for which you are trying to file a mechanics lien on. Therefore, your mechanics lien will be invalid. Utah courts just made that very clear.
Helen and Ralph Hansen are the landowners in this case. The Hansens, back in 2006, were approached by a real estate developer with a proposal to buy the land they owned in Weber County and turn it into a residential subdivision. The Hansens agreed as long as they were allowed to keep three parcels to themselves. The sale was still not official though.
The developer then hired Reeve & Associates, Inc. to conduct preparatory work on the land such as testing the soil, preparing the subdivision plan, and obtaining the proper permits from the county. The developer gave Reeve a $4,000 retainer, and Reeve started working on the project by September 2007. Throughout the process of work, Reeve continued to send invoices to the developer but remained unpaid from May 2008-2009. By May 2009, Reeve realized the project was dead. The sale transaction was never executed. Reeves filed two mechanics liens against the property and moved to foreclose the liens to receive payment for it’s work. It also filed an unjust enrichment claim. Both failed, and Reeve appealed.
The Appellate Court
In Reeve & Associates, Inc. v. Tanner, 2015 UT App. 166, the Utah appellate court affirmed the lower court’s decision to find both mechanics liens invalid. The reasoning behind this decision was that Reeve was not performing work under the authority of the owner or an owner’s agent. Reeve made the argument that the developer was in fact an implied agent of the owner and that the statute, although requiring authority, did not require express authority. The statute specifically reads
all persons performing [qualifying work] shall have a lien upon the property upon or concerning which they have rendered service . . . whether at the instance of the owner or any other person acting by his authority as agent, contractor, or otherwise.
Reeve relies on the “or otherwise” language to refer to implied authority. The court denied this argument because no evidence was submitted to prove any sort of agency relationship between the Hansens and the developer. Whether the interpretation of the statute is correct or not, Reeve still needed to present evidence of a connection. Without this evidence and authorization from the owner, Reeve’s mechanics liens are invalid.
Was this justice? Is it fair that the contractor goes unpaid? Your first reaction should be “of course this isn’t justice.” Unfortunately from a legal standpoint, this is justice. Protecting yourself from pitfalls like this can take some due diligence. Make sure you have a contract in writing that is specific on these issues. Make sure you understand who you are contracting with, and what other parties are involved. Make sure you understand the authority and capacity at which each party is acting. Mechanics liens are a powerful legal tool to get you paid… if they’re valid.