In the late 70’s and 80’s, there were a number of cases that came down addressing and analyzing a situation where tenants entered into a contract for improvements to the real property and subjected, or almost subjected (depending on how the court ruled), the landlord’s property to a mechanic’s lien.
The analysis at that time hinged greatly upon whether an agency relationship existed and whether the landlord bestowed sufficient authority upon the tenant for the tenant to be able to subject the property to a mechanic’s lien.
Several cases articulated various principles, essentially holding that such a determination required more than just a landlord-tenant relationship:
“[t]he fundamental principle is that the ‘mere relation(ship) of landlord and tenant does not in itself create an agency in the tenant within the meaning of the statutes covering mechanic’s liens.’” Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d 46, 49 (Mo. Ct. App. 1979)(quoting Sol Abrahams & Son Const. Co. v. Osterholm, 136 S.W.2d 86, 92 (Mo.App.1940); Ward v. Nolde, 259 Mo. 285, 168 S.W. 596, 600 (1914); McGuinn v. Federated Mines and Milling Co., 160 Mo.App. 28, 141 S.W. 467, 468 (1911)).
“A corollary principle is that the mere fact that the landlord or lessor consented to the lessee’s making of alterations for the Lessee’s convenience does not create an agency for purposes of the lien.” Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d at 49 (citing Ward v. Nolde, 259 Mo. 285, 168 S.W. 596, 600 (1914); Curtin-Clark Hardware Co. v. Churchill, 126 Mo.App. 462, 104 S.W. 476, 477 (1907); Winslow Bros. Co. v. McCully Stone Mason Co., 169 Mo. 236, 69 S.W. 304, 305 (1902)).
The cases point to the importance of the contractual language between the landlord and the tenant. “For an agency to exist that would allow the tenant to encumber the interest of the landlord in the property, a right ‘must spring from (the) contract, express or implied, between the tenant and landlord.’” Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d at 49 (citing Powell v. Reidinger, 234 S.W. 850, 852 (Mo.App.1921)).
However, in order for a contractor to have a lien, the Court of Appeals, in the Paul A. Medley case held that the landlord must have some intent in requiring that the tenant make some alterations which amount to a “permanent and substantial benefit to the leasehold.” Id.
“In Messina,…the court summarized certain principles that have developed in determining whether a lessee is the agent of the lessor so as to impress the lessor’s interest with a lien. Those principles are as follows:
(a) mere relationship of lessor lessee does not create agency;
(b) at the time of the execution of the lease the lessee must be obligated to make the changes or improvements;
(c) the improvements must be of substantial and permanent benefit to the leasehold;
(d) mere consent by lessor allowing change or improvements is insufficient; and
(e) in ascertaining the requisite intent, both the lease instrument and the whole of the circumstances may be considered.” Bates v. McKay, 724 S.W.2d 565, 571 (Mo. Ct. App. 1986)(citing Messina Brothers Construction Co. v. Williford,630 S.W.2d 201, 210 (Mo.App.1982)).
“In determining whether the improvements were of permanent and substantial benefit to the leasehold, it is appropriate to consider the improvement in question in relation to the size of the building, whether the improvements substantially altered the character of the premises, and the value to the lessor.” Bates v. McKay, 724 S.W.2d 565, 572 (Mo. Ct. App. 1986)
(citing Paul A. Medley, Inc. v. Money Town, Inc., 581 S.W.2d 46, 49 (Mo.App.1979)).
These factors are important because they weigh the interests of the general contractor and the owner of the property in an attempt to arrive at the most equitable outcome. The underlying principle is that Missouri courts seek to determine whether the burden of payment (or loss of payment) should fall on the owner or general contractor in an effort to reduce or prevent any unjust enrichment to the parties involved.
Conclusion Regarding Tenant’s Ability to Subject a Landlord’s Property to a Mechanic’s Lien in Missouri
The answer to whether a tenant can subject a landlord’s property to a mechanic’s lien is very fact intensive. As explained above, there are a number of factors that are weighed before a court will make a determination regarding whether the tenant was deemed an agent for purposes of subjecting the landlord’s property to a valid mechanic’s lien. If you find yourself in a similar situation involving the filing or necessary removal of a mechanic’s lien, please contact one of our experienced attorneys to advise you of your rights.