Mechanics Liens - Gone in 120 Days?
Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Fall 2004, Volume 3, Number 4
Mechanics Liens - Gone in 120 Days?
by Pamela Butler O'Brien, Underwriting Counsel
Your title reveals a G.L.c. 254, §2 Notice of Contract filed last year and nothing more. Title is fine; the lien has expired, right? They didn't record a Statement of Account within 120 of the Notice of Contract so it must be gone, right? Not necessarily so.
The mechanics lien law was originally established, and continues to be, a law designed to protect those who furnish labor or materials used to improve real property. As it is a statutory animal, the courts have consistently required strict compliance with the statute in determining both the priority and the validity of lien. Strict compliance with the statute provides protection for the furnishers of labor and material that are not extinguished by the mere lapse of time and create a trap for the unwary real estate conveyancer.
The first step toward perfecting a mechanics lien is to file a notice of contract. With either a §2 or §4 lien, the contractor or subcontractor, as the case may be, may file a notice of contract any time after the execution of the contract, but not later than the earlier of: (1) sixty days after the notice of substantial completion; (2) ninety days after the recording of a notice of termination; or (3) ninety days after last furnishing labor or materials. Since the notice of contract may be filed or recorded any time after execution, work to be performed under the contract may not even have begun at the time of filing or recording. The statute does not require an anticipated completion date to be part of the Notice of Contract, so there is no way to determine from the record title when work is to be done. The second step to perfecting either the §2 or §4 lien is filing a Statement of Account. The statute requires that the Statement of Account be filed or recorded within the earlier of: (1) sixty days after the filing or recording of the notice of substantial completion; (2) ninety days after filing or recording of the notice of termination; or (3) ninety days after materials were last furnished or work was last performed. This requirement leads to the first common mistake, thinking that the Notice of Contract is dissolved if a Statement of Account is not filed within 120 days of the Notice of Contract. The lien has not necessarily dissolved at this time. If the contractor is continuing to work on the property, and the owner has not filed a notice of termination, the countdown may not even have begun to run. It is this uncertainty that makes it impossible to determine of record when the lien will be dissolved and thus creates a cloud on title until such time the lien is released or a notice of termination or notice of substantial completion is filed or recorded.
A second common misconception is that the account contained in the original notice of the contract as set forth in a §4 lien is equivalent of the Statement of Account filed in connection with a §2 lien, and will begin to count the running of the 120 days that will dissolve the lien. But care must be taken to remember that the notice of contract may be filed at any time after execution of the contract and may bear no relationship to the date work was actually performed or whether or not work is continuing to be performed under the contract.
What to do when faced with a Notice of Contract in your title? Of course a release of lien is always an acceptable solution. Sometimes, however, that is not the practical answer to your particular situation. The work that was the subject of the notice of contract may have ended some time ago, perhaps even with a previous owner. Sometimes there was a dispute between the contractor and the homeowner and the contractor refuses to provide the release despite having been paid for work done. In any of these cases, feel free to contact your local Stewart Title underwriter for assistance in providing practical solutions to real problems.