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Can a mechaics lein be filed when a customer breaches contract before work begins after a contract is executed?

Entered into a contractual agreement with new homeowner purchasing a house with a 203K construction loan. 2 Days after closing customer informs in writing via email that he will self perform 70% of the contract. We met with the owner and loan officer informing them that this is illegal and impractical, while waiting for them to get their act together we received a contract termination letter due to not starting yet. We have lost a 50k dollar job due to this action and have all the time vested lost. Can I file a mechanics lien under the circumstances? If so can I file it for the entire contract amount.

1 reply

Sep 28, 2018

I'm very sorry to hear about that. When an owner breaches their contract with a contractor, that contractor very well may be entitled to damages incurred as a result of that breach. However, that does not automatically mean a mechanics lien will be appropriate. Generally, mechanics liens are available to those who perform construction work and go unpaid. The lien secures the amounts owed for improving the property. When work has not actually taken place, and the property has not yet been improved, a mechanics lien likely cannot be filed. Of course, that does not mean recovering damages is not possible - rather, it just means some other route to recovery must be taken. One option may be a Notice of Intent to Lien, which is acts a lot like a warning or demand letter. It states that, if payment isn't made, a mechanics lien will be filed. Even in a situation where a valid mechanics lien might not be an option, the threat of lien can go a long way toward compelling payment. Sending a demand letter unrelated to a lien filing is also an option - and when a lien filing would not be valid, threatening other legal action (such as a breach of contract claim) could also lead to payment. Nobody wants to deal with a lawsuit, and when an owner knows they're in the wrong, threatening action over the owner's alleged breach could let them know you mean business and jump start negotiations. Finally, if threats don't work, a claimant might be able to recover damages through legal action. Lawsuits can be both risky and expensive, so it's probably a good idea to evaluate whether taking legal action is worth it. However, if a claimant can show that they were damaged by the owner's options and that the claimant incurred financial loss, there may be an opportunity for recovery. Before deciding on taking legal action, it would be wise to consult with a local attorney familiar with contract law so that they might take a deeper look at your situation and the relevant documentation and communications. They will be able to evaluate your position and advise on how to move forward.

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