An Examination of a Recent Court Decision Discharging a Mechanic’s Lien

Construction going on in the city.

As previously discussed in this blog, after a property owner files an application to discharge a mechanic’s lien, a hearing is held in which the contractor is required to demonstrate that there is “probable cause to sustain the validity of the lien.”  Sheriff v. Harris, 2014 WL 566150, *5 (Jan. 13, 2014).  “The legal idea of probable cause is a bona fide belief in the existence of facts essential under the law for the action and such as would warrant a man of ordinary caution, prudence and judgment, under the circumstances, in entertaining it.” Id.  The requirement of “probable cause” is a lower burden of proof than would be required at a full trial on the merits; however, the Sheriff decision evidences that a low burden of proof is not the same as requiring no proof at all.  Nonetheless, the decision of illustrative of the evidence that must be presented to establish “probable cause” to sustain a lien.

The court in Sheriff noted that, “[t]o establish probable cause to support a mechanic’s lien, a person must first show that he is entitled to claim a lien.”  Id.  According to Conn. Gen. Stat. §49-33, the individuals and/or entities who are entitled to claim a lien are those that improve a building and/or plot of land “by virtue of an agreement with or the consent of the owner.” The question of whether there is a legally enforceable agreement between two parties can be resolve by well-established authority pertaining to the formation of contracts.  Where the owner is not a party to a legally enforceable contract, the court must engaged in a more thorough analysis to determine whether the owner has “consented” to the work being performed in a manner that would allow the owner’s property to become security for the contractor’s alleged debt.

In light of the foregoing, if the owner is not a party to a contract for the subject work, a contractor seeking to maintain a mechanic’s lien must first establish that the owner “consented” to the work in a manner consistent with prior court decisions.  According to the Sheriff decision, “the consent required from the owner or one acting under the owner’s authority is more than the mere granting of permission for work to be conducted on one’s property or the mere knowledge that work was being performed on one’s land. The consent meant by the statute must be a consent that indicates an agreement that the owner of at least the land shall be, or may be, liable for the materials or labor.”  Id. at *6.  Thus, a contractor seeking to maintain a lien must demonstrate that the property owner was willing or, at least, potential willing to pay for the work that was performed.

The requirement of financial responsibility for the work explains the rationale for requiring a contractor to file its mechanic’s lien against the interest of the property owner or a tenant and not both.  Although long-term tenants often have leased space fit out for their use, such tenants cannot perform such work without the “consent” for the property owner.  However, the consent of an owner to allow a tenant to perform repairs and/or improvements to a property shall not support a mechanic’s lien unless the owner agrees to be financial liable for said repairs and/or improvements.

In addition to the consent of the owner, the court in Sheriff stated that the contractor’s failure to provide sufficient evidence of the value of the labor, materials, and/or services provided was “a second, independent ground for the discharge of the mechanic’s lien.”  Id. at *8.  In Sheriff, the only evidence of the value of the work was the contractor’s own invoices and testimony.  Specifically, the court had difficulty determining the value of the work based upon the invoices alone because the invoices were vague and were somewhat contradicted by the contractor’s own testimony.  Thus, Sheriff is a cautionary tale for practitioners seeking to establish probable cause.  Prior to any hearing, a detailed analysis of the available evidence must be undertaken to determine its sufficiency.  If a client does not have sophisticated billing practices, in addition to the invoices pertaining to the work, it would be prudent to submit payrolls, material receipts, subcontracts, and general ledgers to substantiate the value of the work performed.

Finally, the Sheriff decision provides one last important point to consider when dealing with mechanic’s liens. Although many court decisions state that the mechanic’s lien statutes are to be liberally construed because of their remedial intent, there are limits to the latitude the court will grant.  Specifically, “[w]here the certificate is either intentionally false, or so grossly inaccurate as to show that there was no attempt to give an accurate and true description, then, if the statute means anything, the certificate out to be held void.”  Id. at *9.  In my research, I’ve found very few mistakes that will require the invalidation of a mechanic’s lien.  Typically, a mistake in the amount claimed due will simply result in a reduction in the amount of the lien instead of an outright discharge.  In Sheriff, the court invalidated the lien because it suspected that the amount claimed was, at least, a grossly negligent overstatement if not an outright falsehood.  Thus, it is best to be conservative when determining the mechanic’s lien amount to be claimed.

If you should have any questions regarding any aspect of mechanic’s lien law, please give me a call.

Scott Orenstein
(203) 640-8825