Home>Levelset Community>Legal Help>We did mitigation for a bar that is located in a strip mall. The strip mall is owned by the landlord and the bar is owne

We did mitigation for a bar that is located in a strip mall. The strip mall is owned by the landlord and the bar is owne

KansasRight to Lien

We did mitigation for a bar that is located in a strip mall. The strip mall is owned by the landlord and the bar is owned by the tenant. We did no work on any structure that is owned by the landlord therefore, we have no contract with him and he had no part in the claim or payments. The claim was invoiced in 4 different parts per insurance request- all but 1 invoice has been paid in full and 1 other invoice has been partially paid (about a $60k balance). When we filed the lien, it was placed on the landlord's property as advised- leaving a very unhappy landlord. Also, since the lien was filed, we have been in negotiations with the insurance company to try to come to an agreement but getting nowhere. Therefore, the amount turned in when the lien was filed with is different then the current amount due. The landlord's attorney is coming at me with a sharp stick because of those details and understandably, is defending his client. What would be the best way to handle this very specific but unique situation?

1 reply

Nov 15, 2019

It's completely normal - if not expected - that a property owner would be angry about a mechanics lien being filed on their property. And, keep in mind that an owner's reaction to a filed lien will very often be to challenge the filed lien. With that in mind, let's look at (1) liens on a landlord's property; (2) what to do when a lien is partially paid or when the claimant has agreed to reduce their claim; and (3) options for proceeding when at loggerheads with an owner.

Kansas mechanics liens on tenant improvements

Kansas seems to follow the general rule on mechanics liens and tenant improvements. When a lessee authorizes a project on their landlord's property, the lessee's interest will generally be subject to lien. But, the owner's interest in the property - the fee title interest - will generally only be lienable if the landlord was somehow involved with the authorization, approval, or direction of the work. So, in a situation where the lease agreement requires the tenant to make improvements, or where the landlord directed the improvement, lien rights against the landlord's interest would likely be available. And, when the landlord is at least aware of the project being undertaken, then the landlord's interest may be lienable. But, if a landlord is totally and completely blindsided by the fact that work was done at all, there's a fair chance that lien rights don't exist against the fee title to the property. More on that topic here: What Happens to Mechanics Lien Rights If My Project is a Tenant Improvement?

What to do when a lien has been partially paid, or when the claimant has agreed to reduce their claim

For one, as long as a mechanics lien reflects what's owed at the time the lien is filed, that lien is likely valid and enforceable (at least as to the amount of the claim). Claimants have few options to reduce the amount of their claim once the lien is filed - and, if it comes down to it, a claimant can always opt to pursue an amount less than the amount of their lien claim, if need be. Further, Kansas' lien statute doesn't specifically allow for the amendment of lien claim. Plus, even where mechanics lien claims can be amended, they can only be amended prior to the deadline to file. As a result, attempts to amend a lien filing could actually compound problems rather than relieve them. Levelset has written about this topic before: I Received Partial Payment — What Should I Do With My Mechanics Lien?

How best to proceed with an angry owner and no recovery in sight

It's unfortunate, but there's no one "right way" to resolve a construction payment dispute. Once a mechanics lien has been filed, it's normal for tempers to be hot and for the owner to want to poke holes in a lien against their property. But, at the same time, leveraging that lien claim is often the best tool a claimant will have to get paid. For one, when insurance was supposed to pay for the work, and when a tenant was the one to authorize the work, it's likely a good idea to put pressure on the insurer and tenant to make payment. And, notifying or reminding a tenant of the lien filing may help with that - mechanics liens regularly put tenants in hot water with their landlords, and may even result in a breach of their lease. Further, doubling down on a lien claim may be an option too. By sending a document like a Notice of Intent to Foreclose, a lien claimant can show that they're serious about their lien claim and about getting paid. Further yet, threatening to pursue other legal options (or actually pursuing them) against a customer may also help to move things along. Anytime there's a contract for work that goes unpaid, there's a chance that a breach of contract claim may be appropriate. Or, even if there isn't a contract, unjust enrichment might be on the table. And, a claim under Kansas' prompt payment laws might work too.

Consulting with a local construction attorney will help to provide clarity on how best to proceed

For the ultimate clarity, it'd be wise to consult with a local Kansas construction attorney. They'll be able to review your circumstances and any relevant documentation, then advise on how best to proceed.

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