How much should you claim in your mechanics lien? That is a very frequently question posed by contractors. A recent case in Connecticut illustrates that setting your claim amount may not always be straight-forward, and that there is a battle in mechanics lien laws between securing the claimant’s full work value and constraining him to the confines of the owner’s agreement and knowledge.
Read more: How to calculate your lien amount
General Rule: Mechanics Lien Claim Amount Should Be Equal To Value Of Contribution
Rules are different state-to-state, but if you wanted a general rule governing the claim amount within a mechanics lien it would be this: file your mechanics lien for an amount equal to the unpaid value of the work you performed at the property.
This is in conformance with the overall purposes of the mechanics lien remedy, which is to secure contractors and suppliers for the value of their contributions to the improvement. The theory is that if they improve a piece of property they should be compensated for that improvement, but only for the value of that improvement.
In many states, like California, a lien claimant could technically be put in a position where their work is valued at one price (say, $10k), but they got someone to agree to pay a larger amount (say, $20k). Because the value of the improvement is only $10k, a state like California could theoretically reduce the lien’s claim amount to the lower amount. Yikes!
Connecticut Mechanics Liens Claim Amount Restricted By Owner’s Agreement
The rule in Connecticut is almost opposite of the general rule and the rule in states like California. Here, the law cares very little about the contribution’s value. Instead, Connecticut restricts (or allows) the mechanics lien claim amount to mirror the property owner’s agreement.
This nuance is addressed in levelset Connecticut Mechanics Lien Resources Page under the FAQ “Can I include Attorneys Fees, Collection Costs or Other Amounts in the Lien Total?” Here is the answer:
No mechanic’s lien may attach to the property in an amount greater than the amount the owner agreed to pay for the building and its appurtenances. Indirect or consequential damages are not allowed in lien claims in Connecticut. Attorney fees may be awarded in a successful foreclosure action.
The property owner agrees with the general contractor to pay a certain price for the improvement. The general contractor hires subcontractors, who hire subcontractors, laborers and suppliers. All of these parties are restricted from filing a mechanics lien “in an amount greater than the amount the owner agreed to pay.”
This seemingly simple rule gets sticky. Consider this issue as an example: What if the aggregate of subcontractor and supplier claims exceed the owner’s agreed amount?
That question is for another day. Today, we’re going to look at a recent Connecticut case that dances with the rule in striking a mechanics lien claim that doesn’t necessarily exceed the value of the owner’s agreed upon price.
Connecticut Case Invalidates Mechanics Lien For Exceeding Owner’s Agreement And Teaches Contractors To Pay Close Attention To Change Orders
Here are two facts about this recent Connecticut case: The initial contract price between the owner and contractor was $155k, and the mechanics lien was filed for $63k. Under the general Connecticut rule the mechanics lien would not be invalid because the lien amount does not exceed the total value the owner agreed to pay for the improvements. Right?
This situation arose in Constr. Ken-Nection, Inc. v. Cipriano (136 Conn. App. 546, 550 Conn. App. Ct. 2012), a decision released by the Connecticut Court of Appeals earlier this month.
In Cipriano, the contractor and owner signed a written agreement to perform work for $155k. The written agreement mandated that all change orders be made in writing. Thereafter, the owner learned he had to do a large amount of site work. He agreed orally to an additional $50k in work, but the total value of all site work required would bring the total contract amount to around $285k.
The contractor did some of the site work (before the underlying contract work) without a signed change order. He billed for $63k, wasn’t paid and filed the $63k mechanics lien.
The Connecticut court of appeals invalidated this lien for two primary reasons: (i) It found that the lien amount was not “justly due” because the change orders were never executed and the owner never agreed to the work; and (ii) It found the lien was filed late b/c the work performed by the parties in excess of the contract could not be counted as work to extend the lien period.
In the court’s own words:
In effect, the plaintiff filed a mechanic’s lien to secure payment of amounts that had never been agreed to by the Ciprianos…
The work that was purportedly done by the plaintiff on September 21 and/or September 22, 2006, was not within the contract . . .