This demand for removal may be accompanied by an accusation that since the lien is improper, it constitutes “slander of title” and that the lien claimant may be held liable for damages, as well as attorney fees and costs. But, is it? And, will he?  It sometimes seems like I’m constantly writing about how the ability to file mechanics liens provides a great foundation on which companies in the construction industry can start to build a solid credit policy. The knowledge that all extensions of credit are secured by an interest in actual real estate allows companies to make good decisions regarding credit customers.

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Everybody knows, however, that life – and especially business – can’t be all puppies and sunshine and rainbows all of the time. It is inevitable that some property owners will fight back against a filed mechanics lien by claiming it is invalid (even if it’s not), and demanding that it be removed. This demand for removal may be accompanied by an accusation that since the lien is improper, it constitutes “slander of title” and that the lien claimant may be held liable for damages, as well as attorney fees and costs. But, is it? And, will he?

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Property Owners (Or Their Lawyers) Say Mechanics Liens Are Invalid All The Time

Once the validity of a mechanics lien is called into question, the natural inclination of many people is to start doubting its validity or effectiveness, even if they did work for which they weren’t paid. If the proper steps were taken, and the work was actually performed, however, there is very little to fear from this assertion. Property owners don’t like having liens encumber their property – that’s one of the reasons why mechanics liens are so effective. Property owners want the lien removed, and to do that, it’s either pay up, or claim the lien is invalid and should be removed by the court.

In order to have the lien removed by the court (and for the lien claimant to be subject to penalties for slander of title, and the property owner’s attorney’s fees) there must be many problems with the lien itself, and/or the underlying claims giving rise to the lien. There are many reasons a lien may be invalid: failure to include necessary language, failure to file within the appropriate time period; failure to properly identify the property, etc. Generally speaking, however, a lien must be frivolous or malicious in order to result in penalties to the lien claimant. At the least, if the lien claimant realizes that the lien is not proper for whatever reason, he will likely be given a chance to remove it prior to incurring penalties.

A mechanics lien may form the basis for slander of title, but to do so the lien must lack a credible basis. A recent case in Vermont, Birchwood Land Co. v. Ormond Bushey & Sons, Inc., 2013 VT 60, P40 (Vt. 2013), makes it clear that many hurdles must be passed by the property owner to succeed in a slander of title action based on a mechanics lien. In Birchwood, the court allowed that a mechanics lien may form the basis for a slander of title claim, but to do so the lien must lack a credible basis. In Vermont, there are three elements required in order to prove slander of title: 1) a false statement, 2) damages, and 3) malice.

Given the above, it is difficult to envision a case in which there was a legitimate dispute to payment in which the lien claimant could ever be liable for slander of title damages, at least in Vermont. The element of malice is difficult to prove in a situation where there is a legitimate dispute. In fact, the court in Birchwood noted that one reason why the slander of title assertion failed is that the “contractor acted in good faith in filing the lien based on the honest belief that it was owed money from developer pursuant to the contract”.