Tag Archives: Mechanic’s Lien

Can a Tenant Subject a Landlord’s Property to a Mechanic’s Lien in Missouri?

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.

Missouri Mechanic’s Lien Requirements [Infographic]

MO Mechanics Lien Requirements Infographic

TIMING

  • Must be filed within six months after the indebtedness accrues
  • Indebtedness accrues on the last day work is performed
  • “A subcontractor cannot, after the termination of an account, extend the mechanic’s lien filing time by rectifying some fault of his in performing the contract.” S & R Builders & Suppliers, Inc. v. Marler, 610 S.W.2d 690, 693 (Mo. Ct. App. 1980).

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NOTICE

1. General Contractor

NOTICE TO OWNER

FAILURE OF THIS CONTRACTOR TO PAY THOSE PERSONS SUPPLYING MATERIAL OR SERVICES TO COMPLETE THIS CONTRACT CAN RESULT IN THE FILING OF A MECHANIC’S LIEN ON THE PROPERTY WHICH IS THE SUBJECT OF THIS CONTRACT PURSUANT TO CHAPTER 429, RSMO. TO AVOID THIS RESULT YOU MAY ASK THIS CONTRACTOR FOR “LIEN WAIVERS” FROM ALL PERSONS SUPPLYING MATERIAL OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT. FAILURE TO SECURE LIEN WAIVERS MAY RESULT IN YOUR PAYING FOR LABOR AND MATERIAL TWICE. ~ R.S.Mo. § 429.012  

2. Subcontractor

A. Residential Owner Occupied Property of 4 Units or Less

  • Consent to Mechanic’s Lien must be in 10 point bold font signed writing, stating:

CONSENT OF OWNER

CONSENT IS HEREBY GIVEN FOR FILING OF MECHANIC’S LIENS BY ANY PERSON WHO SUPPLIES MATERIALS OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT ON THE PROPERTY ON WHICH IT IS LOCATED IF HE IS NOT PAID.” R.S.Mo. § 429.013.2

B. Other Real Property: 10 day Notice of Intent to File Mechanic’s Lien Statement

“Every person except the original contractor, who may wish to avail himself of the benefit of the provisions of sections 429.010to 429.340, shall give ten days’ notice before the filing of the lien, as herein required, to the owner, owners or agent, or either of them, that he holds a claim against such building or improvement, setting forth the amount and from whom the same is due.” ~ R.S.Mo. § 429.100

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MECHANIC’S LIEN STATEMENT CONTENTS

 (a) a just and true account of the demand;

-inaccuracies are unintentional and are the result of honest inadvertence, accident, or oversight, and do not result from deliberate intention or design;

-inclusion of a nonlienable item is the result of honest mistake or inadvertence without intent to defraud and if the nonlienable items can be separated from the lienable items

-no rigid definition of just and true– depends on the facts of each particular case

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General Contractors

“if [] lien statement simply states his account in a lump sum, without itemization.’ Commercial Openings, Inc. v. Mathews, 819 S.W.2d 347, 349–50 (Mo. 1991)(internal citations omitted).

Subcontractors

must  have “an itemized statement of the labor and materials furnished.’” Commercial Openings, Inc. v. Mathews, 819 S.W.2d 347, 349–50 (Mo. 1991)(internal citations omitted).

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(b) a true description of the property, or so near as to identify the same;

  • “need not be letter perfect…” Breckenridge Material Co. v. Byrnesville Const. Co., 842 S.W.2d 551, 552 (Mo. Ct. App. 1992).
  • only be sufficient to enable one familiar with the locality to identify the premises intended to be covered by the lien.” Breckenridge Material Co. v. Byrnesville Const. Co., 842 S.W.2d 551, 552 (Mo. Ct. App. 1992).

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(c) the name of the owner or contractor, or both if known to the person filing the lien; and

(d) verification by the oath of himself or some credible person for him

  • Must be Notarized ~ S.Mo. § 429.080

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EXAMPLES OF LIENABLE ITEMS

If used in improving the property:

  • lumber
  • paneling
  • sheet rock
  • tape
  • paint
  • paint brushes
  • sandpaper
  • saw blades

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LAWSUIT TO FORECLOSE MECHANIC’S LIEN

  • An action to foreclose a mechanic’s lien must be commenced within 6 months of filing the lien ~ S.Mo. § 429.170

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5 Ways to Collect Payment on a Missouri Construction Project

Do Not Enter Construction SignGeneral Discussion about the Collection Process

There are numerous ways to collect payment if you are a contractor owed on a construction project in Missouri.  This article will tell you the five most commonly used methods of collecting when an owner or general contractor fails to pay on a project.  

1. File a Mechanic’s Lien

The first, and perhaps most powerful, way of collecting on a Missouri construction project is by filing a mechanic’s lien statement.  Most contractors will attempt to do this on their own.  While a handful of the do-it-yourself liens that are filed may withstand attack, the majority of the mechanic’s liens filed pro se can easily be vitiated with the basic mechanic’s lien defenses.  

See the article called 4 Defenses to Mechanic’s Liens in Missouri for more information on defending or properly filing a lien in Missouri.  

2. Make a Bond Claim

Not all projects have bonds, but when a bond exists, it acts almost as insurance on the project.  Public works projects almost always require a bond because a governmental entity is the owner on the project, and it would incredibly debilitate that governmental entity’s credibility and image if a contractor were able to lien up the government owned property.  

For example, if an electrician performs work on the city hall building and is not paid for the work performed, the electrician would put a mechanic’s lien on city hall.  In order to prevent

3. Make a Breach of Contract Claim

Even if your lien is invalid or you did not properly preserve your lien rights, you still likely have a claim for breach of contract on a construction project.  Usually construction projects are of a significant enough magnitude to warrant a written contract.  

However, occasionally contractors who are trying to keep the job informal or are “old school” will not sign a written contract that lays out the scope of the work and/or terms and conditions of the contractual agreement.  

Are oral contracts enforceable on a construction project?

As a lawyer, a question that we are often asked is whether an oral contract on a construction project is enforceable. The general answer is yes.  There are certain contracts that are required, by Missouri law, to be in writing.  

4. Make a Quantum Meruit Claim

Quantum meruit basically means whatever is deserved or whatever it’s worth.  It’s a claim based in equity as the policy behind a quantum meruit claim is to effectuate a fair outcome for the parties. For example, if work is performed for someone, it is only fair that the person receiving the work, pay the fair value for that work.  

A quantum meruit claim is secondary to a contract claim.  Some lawyers use it as a catch-all in the unlikely event that the court finds the contract invalid.  Although there would no longer be a valid claim for breach of contract, fairness would dictate that the contractor should be paid in a manner commensurate with the amount of work performed.  

5. Make a Missouri Prompt Payment Act Claim

Last but not least, and perhaps the biggest hammer in collecting on a construction law case: The Missouri Prompt Payment Act.  This is one of the best ways to collect because it comes with interest at a rate of 18% per annum.

That means 1.5% per month.  The statutory interest rate in Missouri is 9%, so this is double the regular statutory rate.

In addition to the elevated interest that a claimant can obtain, the claim also comes with reasonable attorney’s fees.  

This is a major threat for a non-paying contractor or owner as they not only risk paying the full amount for the work performed, there is a significant amount of fees and interest racking up.  

The Missouri Prompt Payment Act provides for certain amounts of time in which the contractor has to make payment of an undisputed amount.  

If the owner or contractor does not make payment within that time period, interest will start to accrue (assuming the claimant has complied with all documentation submission requirements as well as the other contractual obligations.

See 3 Benefits the Missouri Prompt Payment Act Provides Contractors for a more detailed discussion of the Missouri Prompt Payment Act.  

Conclusion

There are a number of ways to get paid on a construction project. You just learned about five different ways above.

The following is a recap of the different methods a contractor or subcontractor can use to get paid on a construction project:

  1. File a mechanic’s lien
  2. Make a bond claim
  3. Make a breach of contract claim
  4. Make a quantum meruit claim
  5. Make a Missouri Prompt Payment Act claim

You’ve learned the starting points for collecting, however there are certain procedural obstacles and technicalities when pursuing any of these claims.  You would be well-advised to consult an attorney if you plan on utilizing any of these methods.  

If you have more questions about collecting for work performed on a construction project, please feel free to contact our St. Louis construction law attorneys with questions.