In early 1997 major revisions to the Massachusetts mechanic's lien law took effect, see Construction Law Comments - Fall 1996. The purpose of these revisions was to secure better payment security on private work for both contractors and subcontractors. Recent decisions of the appellate courts of the Commonwealth have interpreted some of the provisions of the revised statute.
One of the decisions highlighted the importance of claimants not waiting until the end of a job to file a lien since the amount of security (the value) provided by the lien may diminish. The statutory test as to the limit of liability of an owner for a subcontractor's lien is the amount "due or to become due" the general contractor. In that decision a general contractor abandoned the project before the work was substantially complete. After the abandonment subcontractors filed timely notices of contract. It was undisputed that the general contractor abandoned the project, there was an unpaid balance on the general contract, the owner paid in excess of the amount of the unpaid balance to complete the general contract work and the subcontractors were owed balances from the general contractor at the time each filed its notice of contract. The court found that even though the subcontractors' liens were timely filed, the liens had no value since the general contractor's abandonment was a wilful default that terminated the general contractor's right to further payment from the owner including any retention on periodic payments. The court stated that the value of any lien is determined by the amount due or to become due the general contractor at the time a subcontractor files its notice of contract. Here there were no funds due or to become due the general contractor at the time the subcontractors filed their notices of contract and the liens had no value. This is a vivid example of subcontractors waiting too long to file a notice of contract. Even though it may be impossible to determine in advance that a general contractor intends to abandon a project, there are usually signs, such as late or reduced payment on a periodic requisition, which should warn a subcontractor to beware and to take advantage of its statutory right to payment protection. If a subcontractor files a notice of contract, any prudent owner will make sure the subcontractor receives payment before making further payments to the general contractor. And the owner who pays the general contractor without making sure the subcontractor is paid may still have liability to the subcontractor filing the notice of contract. A second appellate decision affirmed the right of a contractor or subcontractor to file a second notice of contract after it withdraws a previously filed notice of contract, if the second filing is timely. This means that if a general contractor or subcontractor files and then withdraws a notice of contract early in a job, the sub or general can file again later in the job. In many jobs, a party will file a notice of contract when a periodic payment is late. The filing of the notice usually results in the owner or general contractor making payment unless there is an insolvency. It appears that there is no limitation on the number of times a general contractor or subcontractor may file for lien protection, and therefore it can be used for periodic payments and final payment. The lesson of each of the above decisions ties together. If you file early in a job and withdraw that notice, you can still file later. But, if you wait until late in the job to file, you may be too late!This
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