Mechanic’s Liens, Part 3: Mechanic’s Liens for Commercial Subs and Suppliers

Date Posted: April 1, 2015

Posted In: Ideas, White Papers,

by Joseph C. Blanner, Esq.
McCarthy, Leonard & Kaemmerer, LC

I. Introduction:

Mechanic’s Liens can be a legal minefield for commercial subcontractors.  There are many technical obstacles and conditions that must be complied with to file a valid and enforceable Lien. In the absence of meeting these specific and detailed requirements, the subcontractor’s lien will not be enforced by the Court and chances of collecting for work, labor and materials can go down dramatically. 

II. Notice Requirements:

Just as with commercial general contractors, subcontractors are required to give the property owner notice of their intent to file a Mechanic’s Lien prior to actually filing it.  However, the form that the notice takes varies considerably from the notice that the general contractor is required to provide.  Subcontractors are required to notify the owner of their intent to lien by personally delivering a document entitled, “Notice of Lien” or “Notice of Intent to Lien” on the property owner at least ten days prior to filing the lien (as opposed to general contractors who have to provide certain specific language in the original contract, on the first invoice, when they commence work or when materials are delivered). 

The subcontractor “Notice of Lien” must include certain information to meet the statutory requirements. It must indicate how much is owed, it must indicate who the subcontractor performed work for, it must provide a description of the property and it must indicate that the subcontractor intends to file a Mechanic’s Lien in ten days if not paid. 

If there are multiple property owners, then each should be personally served with the “Notice of Lien”.  As a matter of precaution, even though the statutes call for personal service, I usually serve it personally and send it via facsimile and certified mail. This is a good practice because several cases have indicated that actual receipt of the Notice is sufficient to satisfy the requirements of the statute. However, this secondary service (via the mail and fax) only should serve as a backup.  It is always the best and most prudent practice to have the Notice personally served on the owner or owners since this is what the statutes require. 

If the owner is a foreign corporation (i.e. not a Missouri company), then service can be obtained by recording the “Notice of Lien” with the Recorder of Deeds in the County where the property is located.  The “Notice of Lien” can also be recorded if the owner is not “at his usual place or abode”.  Thus, if service is unsuccessful where the property owner, such as the registered agent of a corporation, is supposed to be, then the “Notice of Lien” can be recorded as well.    

III. Contents of Mechanic’s Lien:

Where a general contractor has a lump sum or fixed fee contract, the general contractor does not have to provide detailed itemization with his Mechanic’s Lien.  However, this is never the case for the subcontractor.  Subcontractor Mechanic’s Liens must be itemized to be valid and enforceable, which is known as the “just and true account” requirement. 

The primary purpose of the “just and true account” is to afford the property owner the ability to determine whether the labor and materials were lienable items and whether the amount charged was proper.  To be a “lienable” item, it must have been something that was physically used in improving the property (such as materials, labor or consumables).  In the absence of providing sufficient itemization in support of the Mechanic’s Lien, a court could find the Lien unenforceable.

Why is this “just and true account” requirement important to you as a subcontractor? On a Mechanic’s Lien, subcontractors are only entitled to recover the reasonable value of the work, labor and materials furnished by them on the project (which does include reasonable overhead and profit).  However, the reasonable value of the work, labor and materials must be supported by documentation of what was actually furnished.  So, if there is no documentation of what was furnished, how can the subcontractor demonstrate the reasonable value of the services?  The simple answer is that he cannot.  So, if a subcontractor wants to collect on a Mechanic’s Lien, the Lien must have sufficient documentation to identify exactly what was provided on the project.    

Typically, I recommend that the Mechanic’s Lien for a subcontractor contain the following documents to comply with the “just and true account” requirement: (1) original contract; (2) change orders or extra work orders; (3) invoices or applications for payment; (4) statement of account, job cost history and labor detail; (5) employee’s physical time sheets; (6) subcontract agreements and subcontractor invoices; and (7) material supplier invoices. If there are other project related documents that identify or describe the work, labor or materials, these should be included as well. 

These documents will be assembled as exhibits and attached to the Mechanic’s Lien.  I generally organize them in the list set forth above because it makes it easier to understand what the subcontractor furnished and what was charged when organized in this fashion (and makes it easier to prove the reasonable value of what was provided).  When preparing the documents to provide to an attorney, the subcontractor should keep the documents organized. Attorneys are paid for their work by the hour.  So, the less hours that it takes to accomplish a task, the less that task costs. Documents organized in this fashion make it much simpler and less expensive to prepare the Mechanic’s Lien. 

Also, when copying invoices, the subcontractor should be sure not to include any non-lienable items. I have seen receipts for gas stations or restaurants in with material supplier invoices.  While the cost of these these things may have been billed to a project, they are not lienable and cannot be a part of the Mechanic’s Lien.  And, the intentional inclusion of non-lienable items in a Mechanic’s Lien can result in the entire Lien being invalidated by the Court. 

Also, the subcontractor should be careful to make sure all the material supplier invoices and other documents are legible. I have had subcontractors provide documents that could not be read. If this is the case, then the subcontractor might not be able to collect for those items.

While the Courts have indicated that a third-party should be able to review the documents supporting the Lien and figure out what was furnished on the project, the Courts have also indicated that invoices containing vendor codes for materials purchased are acceptable. So, if items purchased are described on the invoices by certain codes, that does not mean that the subcontractor will not be able to collect for those items.    

In addition to the items described above, the Mechanic’s Lien will have to provide an accurate legal description for the property and will have to correctly identify the property owner.  To ensure that these requirements are met, we generally purchase a letter report from a title company. In addition to identifying the owner’s correct name and the legal description of the property, a letter report will indicate if any other party, including any lenders or other lien claimants, have an interest in the property.     

IV. Deadlines for Filing of Lien:

In Missouri, a lien claimant (general contractor or subcontractor) must file a Mechanic’s Lien within six months of the last date that the contractor furnished work, labor or materials (excluding punch list or warranty work) on the project.  Additionally, the limitation period for a Lien cannot be extended by agreement between the general contractor and subcontractor or between the owner and general contractor. 

The subcontractor should also keep in mind that it has to provide the “Notice of Intent” at least ten days prior to filing the Lien.  So, the subcontractor really has less than six months to start the process.  Because the “Notice of Lien” has to be served and because it can take some time to obtain the letter report, I generally recommend that the Lien process be started no later than five months after the last date of work.  Waiting to the last minute can result in the Lien not being timely filed and could reduce the likelihood of collection.    

Also, subcontractors often confuse the date that billing occurred with the last date of work for Lien purposes.  To avoid this problem, I generally recommend that A/R reports be modified to indicate the last date of work.  Furthermore, it may be a good business practice to designate a certain employee to keep track of the last date of work on delinquent accounts.

Once the Lien has been filed, it will become void and unenforceable if a lawsuit to enforce it is not filed within six months of the filing of the Lien.   

For a summary of what a Mechanic’s Lien is and how it can help a subcontractor collect, please see “Missouri Mechanic’s Liens: Part 1: Mechanic’s Liens Summarized and Explained”.

Joe Blanner is a partner in the firm of McCarthy, Leonard & Kaemmerer, PC. He is also the president of Construction Forum STL. Joe can be reached at jblanner@mlklaw.com, telephone 314.392.5200