Use Mechanic’s Liens to Collect Bad Debt in Massachusetts
MASSACHUSETTS —- A building materials supplier’s customer went from slow pay to no-pay in a blink of an eye. When the customer stopped making promised payments, the supplier called me.
Upon my review of the file, I noticed that my client had used my “Notice of Contract Contract.” The “Notice of Contract Contract” provides the written contractual basis for filing and perfecting mechanic’s liens in Massachusetts. Although independent documents containing an offer and acceptance may suffice to create the requested written contract, a single written contract for the purposes of a mechanic’s lien is preferable.
I promptly prepared the Notice of Contract for the numerous projects for which my client provided materials. I then made sure they were properly recorded in the correct Registry of Deeds. After recording the Notice of Contract I notified the owners of the liened property as required by the Massachusetts Mechanic’s Lien Statute.
For one of the liens, although the names of the general contractor and owner were similar, they were actually two different types of business entities. An attorney inexperienced in title run downs and mechanic’s liens may have missed the distinction and proceeded with using a Section Two Notice of Contract Form proper for Section Two of the Mechanic’s Lien Statute instead of that necessary to perfect a lien under Section Four of the Mechanic’s Lien Statute. Section Two pertains to contracts with the owners of the property whereas Section 4 deals with contracts with general contractors, sub-contractors or sub-sub-contractors.
After my client finished supplying its building materials to each project, I prepared and recorded a Statement of Account pursuant to M.G.L. c. 254 §8. The Statement of Account is just that – – a statement of how much is then due on the account.
To enforce the lien, within 90 days after recording the Statement of Account I filed suit in the Superior Court in the county in which the property was located. Within 30 days after filing suit, I recorded an attested to copy of the complaint at the applicable Registry of Deeds as required by the Mechanic’s Lien Statute. This last component is essential because it puts the world on notice that monies are still outstanding and that the creditor intends to enforce the lien. Failure to timely and properly record an attested copy of the Complaint results in an automatic loss of mechanic’s lien rights.
During the pending of the litigation, the debtor wanted to sell one of the properties for less than the amount of the lien for financial reasons. Upon my advice, my client refused. After several months of contentious negotiations, I obtained for my client significant additional collateral secured by a mortgage to ensure my client would be paid the full amount of monies it was due.