Questions regarding a mechanics lien’s, or potential mechanics lien’s, validity are some of the most important questions considered by lien claimants. While there are many reasons that may cause a mechanics lien claim to be invalid, the most fundamental is whether or not the work performed is of a type granted mechanics lien protection – whether the claimant is a party entitled to the benefits of the mechanics lien instrument. In many states, in order to qualify for mechanics lien protection, the work performed must constitute or be a part of a permanent improvement to the property. But, not only can determining whether an improvement is “permanent” be difficult, so can determining whether or not work even qualifies as an “improvement” at all. In a recent case in Utah, an appeals court examined this very question, and came to what I consider a relatively non-sensical decision.
Background of the Case
The case Total Restoration, Inc. v. Merritt stems from a mechanics lien filed by Total Restoration, Inc. (Total Restoration) for flood remediation work performed on a home. The home sustained damage when a fire-sprinkler pipe and sprinkler head froze, cracked, and sprayed water into the home. Work done by Total Restoration included removing baseboards, carpet pad, drywall, and insulation from the home, drying the home, cleaning the carpets, and applying an anti-microbial agent to prevent mold growth. Further, Total Restoration also hired a subcontractor to repair the damaged fire suppression system. When the homeowners failed to pay for the work, Total Restoration filed a mechanics lien against the property. The trial court awarded Total Restoration the amount claimed on the lien, as well as attorney’s fees. The homeowners appealed the judgment under the theory that the work performed was not eligible for mechanics lien protection under Utah law, and therefore, the lien should have been determined to be invalid.
The Court’s Determination
After some discussion, the court sided with the homeowners and decided that the flood remediation work performed by Total Restoration was not the type of work able to be secured by a mechanics lien, as it was not an “improvement” to the property. Central to that determination was the conclusion that mitigation or remediation work that “returns the property to its pre-casualty condition” is not an improvement to the property for the purposes of the Utah mechanics lien law.
mitigation work that merely involves cleanup or remediation to return the property to its precasualty condition and that does not implicate any physical affixation to or alteration of the structure of the building or the premises cannot be lienableThe court noted that “improvement” is a legal term that, in the Utah mechanics lien context, is “construed to connote physical affixation and enduring change to premises in a manner that adds value” as opposed to simply “any work that makes the premises better”. This decision is in keeping with some other relatively recent Utah cases. In 2011, a Utah court held that flood remediation work similar to that performed by Total Restoration in this case did not meet the “improvement” requirement for the attachment of a valid mechanics lien, stating that “mitigation work that merely involves cleanup or remediation to return the property to its precasualty condition and that does not implicate any physical affixation to or alteration of the structure of the building or the premises cannot be lienable”.
Discussion of the Issue
In my opinion, the court reached an incorrect conclusion in determining what constitutes a lien-able improvement to property. Support for this belief can be found in both the Utah mechanics lien statute, and prior Utah case law.
Utah’s mechanics lien statute defines an “improvement” as:
a) a building, infrastructure, utility, or other human-made structure or object constructed on or for and affixed to real property; or
b) a repair, modification, or alteration of a building, infrastructure, utility, or object . . .
While the “physical affixation” standard noted by the court in Total Restoration seems to spring from 38-1a-102(20)(a), above, (b) clearly notes that an improvement can be a repair or modification. Further, Utah courts have historically been aware of the broad nature of the mechanics lien law protection. A case from 1918 stated that
The aim and purpose of our mechanics lien law manifestly has been to protect, at all hazards, those who perform the labor and furnish the materials which enter into the construction of a building or other improvement.
Remediation and repair work is an essential part of construction projects, as the work that even the Utah appeals court would determine lien-able can only be accomplished subsequently to the remediation work’s completion. Even if this is a bit of a stretch, other cases give additional support to the theory that the mechanics lien law statute should be interpreted broadly. In Calder Bros. Co., v. Anderson the Utah Supreme Court noted that “The purpose of the mechanics lien act is remedial in nature and seeks to provide protection to laborers and material men who have added directly to the value of the property of another by their materials or labor”. It is clear that remediation and repair work directly add to the value of property. Finally, Bailey v. Call advised that “to protect laborers and materialmen the courts will construe the [mechanics lien] statute broadly”.
Even without these significant and relatively straightforward urgings to apply the mechanics lien law broadly in favor of the parties performing work on property, it seems against common sense to determine that remediation and repair work does not improve property if it merely returns the property to the state it was originally in. The question shouldn’t be whether the work improved the property beyond its original state, but whether the work improved the property from the condition in which it found when the work commenced. Failure to make this distinction can result in wildly unfair and ludicrous results. Take, for example, a dilapidated structure. If work was done which in al respects would be lien-able to recondition the property to its previous condition, would that be “remediation” un-qualified for mechanics lien protection if it doesn’t add value from the baseline value of the property prior to its descent into disrepair? Would re-constructing a house that burned not qualify because the house was merely put back into the position it was in prior to the blaze? These results do not seem right, and likewise, by extension, neither does the result in Total Restoration. Failure to provide protection to project participants that, by their labor, “fix-up” a property goes against the stated purpose of the mechanics lien law.