See Attorney Amann on “Quit Getting Screwed” YouTube Podcast for General Contractors, Sub-contractors and Homeowners

April 28, 2023

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(124) Episode 85: Learn Your Liens- New Hampshire! (With William J. Amann) – YouTube

New Hampshire Mechanic Liens Overview

1. Do you have to be a licensed contractor to work in NH?

New Hampshire is among only a handful of states that does not require a license for construction or renovation projects at the state level. This means that if you plan on becoming a general contractor in New Hampshire, you will need to check with your local city or county jurisdictions to meet their requirements.

Licensing by the state government is, however, required for several specialty classifications. Electricians, plumbers and asbestos and lead abatement practitioners must obtain licensure at the state level. To obtain licensing for these specialties, you will need to go through the proper licensing process, including applying to the appropriate board, exams and education, and paying all necessary administrative fees.

2. Who has lien rights?

A mechanic’s lien may be filed by any person who, alone or with others, performs labor or furnishes materials worth $15 or more to any construction project. N.H. Rev. Stat. Ann. § 447:2. In other words, general contractors, construction managers, design-build teams and others may be entitled to a mechanic’s lien. Exactly who among the persons who contribute to the construction project is entitled to assert a lien varies.  Whether certain contributions, such as an architect’s blueprints, the rental company’s lease of a backhoe to a contractor, or the local business’s provision of portable toilets to the job site, may be entitled to a mechanic’s lien depends on the circumstances.    

The general rule is that anyone who supplies labor or materials directly under contract with the owner is entitled to a lien.  This includes the general contractor, construction managers, design professionals, equipment suppliers and others who have contracts directly with the owner.

A subcontractor must have a contract directly with either the general contractor or a subcontractor of the general contractor.  New Hampshire Rev. Stat. Ann. § 447:5 grants anyone furnishing labor or materials “by virtue of a contract with an agent, contractor or subcontractor of the owner” the same lien as that provided to general contractors.  In other words, mechanic’s lien rights can extend to those who have contracts directly with the first-tier subcontractor. See Lyle Signs, Inc. v. Evroks Corp., 132 N.H. 156, 159 (1989).

(a) Site of Subcontractor’s Performance

Subcontractors need not actually perform work at the site. A subcontractor who designs and fabricates entirely in its own shop items that will be incorporated into the project is still considered a subcontractor. Lyle Signs, Inc. v. Evroks Corp., 132 N.H. at 161.

(b) Bonding Instead of Mechanic’s Lien

A subcontractor may choose to accept a note or a bond in lieu of a mechanic’s lien. N.H. Rev. Stat. Ann. § 447:14; Calef v. Brinley, 58 N.H. 90 (1877) (whether a lien is waived by the taking of a note depends upon the understanding of the parties at the time). In addition, a subcontractor may, by contract, waive its right to assert a mechanic’s lien in the first place. Duke/Fluor Daniel v. Hawkeye Funding, LP, 150 N.H. 581 (2004).

New Hampshire Rev. Stat. Ann. § 447:3-5 provides lien rights to persons who “perform labor or furnish materials” to a building project. Companies who lease equipment to contractors or subcontractors to accomplish the task at hand are some of the most important contributors to the work site.  Typically, however, equipment suppliers are neither furnishing labor nor supplying materials to the construction project.

New Hampshire Rev. Stat. Ann. § 447:16 requires contractors on public projects to supply a bond to ensure payment to subcontractors and suppliers.  In NH, mechanic’s liens cannot be recorded against public property. Rather a bond is required on all public projects. The bond requirement has long been interpreted to constitute substitute security for contractors, subcontractors and suppliers whose mechanic’s lien rights are seriously limited on a public project.  New Hampshire Rev. Stat. Ann. § 447:16 requires that the bond must ensure payment for “equipment hired” and “fuel used” in prosecuting the work.  

In 2012, the New Hampshire legislature amended N.H. Rev. Stat. Ann. c. 447 to include design professionals as those entitled to mechanic’s liens. “Design professionals” are defined under N.H. Rev. Stat. Ann. § 447:2, II as architects, engineers, septic designers, wetland and soil scientists and land surveyors.  Design professionals are subject to the same statutory requirements as all other suppliers of labor and materials to a project. Accordingly, the design professional must have a contract directly with either the general contractor or a subcontractor of the general contractor.  I recall working on a $1M mechanic’s lien case in 2008 and the claimant was a design professional who did work on the old Executive Park Drive hotel in Merrimack, NH.  Well, there were many charges (by the Philadelphia based architect) for airplane flights, dinners, lunches, coffee and other things which the claimant tried to claim were valid mechanic’s lien claims.  We settled the case, mostly with title insurance proceeds but as a young attorney at the time, I remember wanting to take the issue up to the NH Supreme Court.  The Legislature took care of that with the 2012 amendment. 

3. What steps do you need to follow to have a valid mechanic’s lien?

A lien is automatically created by furnishing labor or materials to real property.  The party seeking payment must also perfect its lien in order to enforce the mechanic’s lien.  See Pine Gravel, Inc. v. Cianchette d/b/a Site Prep, 128 N.H. 460, 464 (1986).  A mechanic’s lien may be perfected only by filing a lawsuit through a writ of summons and a petition for ex parte attachment on a mechanic’s lien.

ATTENTION GENERAL CONTRACOTRS-New Hampshire’s mechanic’s lien statute makes a distinction between those claimants who have a direct contract with the owner and lower-tiered contractors (whose only contract is with the general contractor or a subcontractor).  This distinction gives general contractors more expansive lien rights than subcontractors, suppliers, or other down-chain contracting parties.  A contractor or a materialman is entitled to an “automatic” mechanic’s lien only if it has a direct agreement with the owner for the provision of labor and materials. General contractors are often the only parties meeting this criterion. Assuming compliance with the statutory requirements, a general contractor has a lien from the first day of work without taking any extra steps other than eventually perfecting the lien should it need to be enforced.

ATTENTION SUB-CONTRACTORS–New Hampshire Rev. Stat. Ann. c. 447 requires different notice and accounting procedures for subcontractors.  Subcontractors are required to provide the property owner with written notice of their intent to claim a mechanic’s lien. This notice must be provided prior to starting the work. N.H. Rev. Stat. Ann. § 447:5. If notice is not given until after work starts, the subcontractor’s lien is limited to the amounts then due to the general contractor or that may become due after notice is given. N.H. Rev. Stat. Ann. § 447:6; Russell d/b/a Maine Mechanical v. Woodbury, 135 N.H. 432, 435 (1992). Consequently, if the subcontractor’s contracting party (i.e., the general contractor) has been paid in full by the time of the subcontractor’s notice of intent to claim a lien, the lien does not attach because nothing is due from the owner. The mechanic’s lien attaches to the owner’s property only to the extent that any future amounts may become due at that point. Accordingly, the sooner the subcontractor provides notice of its lien rights, the more likely it is to secure the full value of its lien. The form of the notice need not be complex and may simply state that the subcontractor will be furnishing labor or materials to the owner’s property pursuant to a contract with the general contractor and that the subcontractor intends to claim its mechanic’s lien rights under N.H. Rev. Stat. Ann. c. 447.

In addition to the notice requirements, N.H. Rev. Stat. Ann. § 447:8 requires subcontractors to provide a written account of the labor and materials furnished. This requires the owner to retain a sufficient sum to satisfy that amount unless the party seeking the lien has been paid by the contractor or the subcontractor. The accounting may be given when the initial notice of lien is given, and it must be updated and provided to the owner every thirty days. N.H. Rev. Stat. Ann. §§ 447:6, 8. The accounting should describe the labor and materials furnished and state the current and total balance due. If no work has been performed during the previous thirty days and providing notice would be “an empty formality,” failure to provide the accounting may be excused.  McGranahan v. Standard Constr. Co., 101 N.H. 46, 47 (1957). The property owner may also waive the accounting as well as the written notice requirement. Janvrin v. Powers, 79 N.H. 44 (1918).

The deadline for securing a mechanic’s lien is 120 days after the services are performed or the material is supplied. N.H. Rev. Stat. Ann. § 447:9. The timing requirement for filing a mechanic’s lien is not tied to substantial completion of the entire project but to the last day that the subcontractor performed work on, or supplied materials to, the project. N.H. Rev. Stat. Ann. § 447:9.

The mechanic’s lien is lost if not filed within the statutory period. Tolles-Bickford Lumber Co. v. Tilton School, 98 N.H. 55 (1953). The performance of punch-list repairs or work performed on the site under a separate contract will generally not extend the 120-day tolling period. The statutory period for perfecting a lien is neither shortened nor extended by insolvency, receivership, death, or breach of contract. Tolles-Bickford Lumber Co. v. Tilton School, 98 N.H. 55 (1953); Russell v. Howell, 74 N.H. 551 (1908) (death of owner does not terminate lien); Freeto v. Houghton, 58 N.H. 100 (1877) (running of lien period is not suspended by owner’s breach of contract that caused the contractor to abandon the work).

The applicable rule is that work of an “inconsequential nature” or work done to remedy defects will not extend the 120-day deadline. Bader Co. v. Concord Elec. Co., 109 N.H. 487, 488-89 (1969) (deadline not extended where subcontractor returned at request of owner to correct defects). Further, in Peabody v. Weitzell, 123 N.H. 416 (1983), the court held that the 120-day deadline was not extended where the contractor returned to the site to perform work that was not included in the original contract. Similarly, in Tolles-Bickford Lumber Co. v. Tilton School, 98 N.H. 55 (1953), the court held that, although the supplier later provided additional material to correct a shortfall, the statutory period commenced to run from the date a final bill was rendered to the owner. On projects that extend over long periods of time, which may involve several distinct phases of construction, the contractor might be well-advised to raise this issue with the owner.

4. How long are the liens good?

Properly perfected mechanic’s liens remain on title to the subject real estate until discharged.

5. Are attorney’s fees and costs recoverable on ML’s?

When a plaintiff sues for money damages, he often seeks a lien or “attachment” on the defendant’s property – real estate being a particular favorite – as security for a judgment.  In New Hampshire, RSA 511-A:4 authorizes attachments “to the extent reasonably necessary to secure any judgment or decree which the plaintiff is likely to obtain” including “allowable interest and costs.”  Such attachments are typically granted in an amount that will also cover any contractual right to interest and attorneys’ fees.  Mechanic’s liens, under RSA 447, are perfected by attachments too.  What if the plaintiff’s contract includes the right to collect interest and attorneys’ fees?  Will the amount of his mechanic’s lien attachment include those things?  The NH Supreme Court has yet to address this but the consensus is No.  Why?  In the absence of express statutory language, it seems that the underlying “value added” theory behind mechanic’s lien statutes in NH controls.  When real estate is improved by labor and materials, it is presumed to increase in value, as measured by the price of the labor and materials.  It is fair to give the providers of labor and materials a lien to that extent because the owner is no worse off when his property is liened for the price of those unpaid goods and services.  The lien accomplishes a transfer of value from benefited owner to unpaid contractor or supplier in recognition of the value they added to the property.  Attorneys’ fees and interest add no value to the property.  I think this is a bad and unfair principle. 

6. If you are a material supplier, do you have to prove incorporation?

No.

7. Can you lien for specially fabricated materials which are not delivered?

No, not under the ML Statute because the ML statute allows for liens specifically for furnishing labor or materials to real property. 

Unlike a general attachment, a mechanic’s lien attaches only to the lot where the work was performed or for which the materials were supplied and not to all of the defendant’s real or personal property.  See N.H. Rev. Stat. Ann. § 447:2 (“[the contractor] shall have a lien on any material so furnished and on said structure”). The lien fastens to the structure for which labor and materials were provided and upon any right of the owner to the loss of land upon which the structure stands. N.H. Rev. Stat. Ann. § 447:2; see also Wurm v. Reilly, 102 N.H. 558 (1960); Boulia-Gorrell Lumber Co. v. East Coast Realty Co., 84 N.H. 174 (1929). The lien also attaches to fixtures and materials provided for the erection or repair of a structure, even though such materials have become a part of the real estate at the time the attachment is made. See Virginia v. Britton, 80 N.H. 340 (1922); Graton & K. Mfg. Corp. v. Woodworth Mason Co., 69 N.H. 177 (1897).

8. Is a construction lender involved in the lien process?

One of the primary benefits of obtaining a mechanic’s lien is the favorable claim priority position gained. Under N.H. Rev. Stat. Ann. § 447:9, mechanic’s liens “shall take precedence of all prior claims except liens on account of taxes.” As between competing mechanic’s liens, the general rule is that lienholders from the same project will share pro rata based upon their respective lien judgment. See N.H. Rev. Stat. Ann. § 447:12; Goudie v. American Moore Tank Co., 81 N.H. 88 (1923).

Properly perfected mechanic’s liens can also enjoy priority over prior record construction mortgages. The mechanic’s lien will not be entitled to the extent that the construction mortgagee shows that the proceeds of the mortgage loan were disbursed either toward payment of invoices from or claims due subcontractors and suppliers of materials or labor for the work on the mortgaged premises or upon receipt by the mortgagee from the mortgagor or his agent of an affidavit that the work on the mortgaged premises for which such disbursement is to be made has been completed and that the subcontractors and suppliers of materials or labor have been paid for their share of such work or will be paid out of such disbursement. See N.H. Rev. Stat. Ann. § 447:12-a.

This would typically be accomplished through lien waivers, where subcontractors acknowledge that they have been paid and agree to waive their lien rights, at least to the extent that they have been paid. Subcontractors should be careful to be sure that the lien waiver covers only lien rights as to payments that they have actually received. New Hampshire Rev. Stat. Ann. § 447:12-b also provides further protection to subcontractors in the form of posting notices of construction mortgages on the jobsite. The statute requires that such notices be posted “in a conspicuous place” on the job site for which the funds were secured. N.H. Rev. Stat. Ann. § 447:12-b. The notice must include the name, address, and telephone number of the lender. Anyone entitled to a lien must, within fifteen days after the posting of the notice, provide written notice to the institution providing the construction funds that such person is furnishing services, materials, supplies, or other things. The written notice provided under this paragraph shall include the name and address of the job site. Failure to provide the notice required by this paragraph shall not alone invalidate the lien.  Moreover, at least forty-eight hours prior to requesting any construction mortgage requisition, the mortgagor or his agent shall post in a conspicuous place on the job site for which the construction funds were secured, the anticipated funding date for said requisition. The mortgagee shall require a copy of said notice, which shall be certified as to its posting by the mortgagor or his agent prior to disbursing any funds.

9. Can you have a lien on a leasehold?

Lien enforcement becomes very difficult when the party directing and paying for the construction does not own the property. New Hampshire Rev. Stat. Ann. §§ 447:2 and 5 allow a party to attach lien rights to the “owner.” Circumstances exist where the general contract is with a long-term leaseholder or other party who has no ownership interest in the property to be liened. A party seeking an attachment on the property can argue that the leaseholder is an agent of the owner. A lien right, however, may be at risk if the owner is not involved in the construction process. The owner will likely contend that the party seeking a lien has no lien rights because the labor and materials were not provided by virtue of a contract with the owner, but rather with a lessor.

10. What amount requires a bond?

Construction on state, county, city, or town-owned property presents unique issues. As mentioned, mechanic’s liens do not attach to property owned by the State of New Hampshire or its governmental subdivisions. N.H. Rev. Stat. Ann. § 447:12. They do attach, however, to any money due from the State or other governmental subdivision to the liening contractor. N.H. Rev. Stat. Ann. § 447:15.

A mechanic’s lien against funds is not often used because New Hampshire law requires public entities to obtain bonds on all projects over $25,000 equal to at least 100 percent of the contract price, conditioned upon the payment by the contractor and the subcontractors for all labor performed and materials and equipment furnished for the project. N.H. Rev. Stat. Ann. § 447:16; General Elec. Co. v. Dole Co., 105 N.H. 477 (1964) (the provisions of N.H. Rev. Stat. Ann. § 447:16 are mandatory).

The items for which the statutory payment bond provides security are listed in N.H. Rev. Stat. Ann. § 447:16. They include

• all labor performed or furnished by the contractors and subcontractors;
• all equipment hired;
• trucks;
• all material used;
• fuels;
• lubricants;
• power;
• tools;
• hardware;
• supplies; and
• labor and parts furnished for the repair of equipment used in carrying out the contract.

N.H. Rev. Stat. Ann. § 447:16.

11. When do notices have to sent and to whom?

This bond is intended to protect suppliers and subcontractors who work on public projects.  Westinghouse Elec. Supply Co v. Electromech, Inc., 119 N.H. 833 (1979). The State has an interest in reasonably ensuring that subcontractors and suppliers are not deterred from bidding and working on public construction projects. Accordingly, the bond requirement protects a material supplier to a subcontractor, General Elec. Co. v. Dole Co., 105 N.H. 477 (1964), but does not protect a material supplier to a material supplier. Lyle Signs, Inc. v. Evroks Corp., 132 N.H. 156 (1989).  The court in Lyle Signs reasoned that the statutory bond “does not protect a materialman’s materialman.” Lyle Signs, Inc. v. Evroks Corp., 132 N.H. 156 (1989).  In other words, to be protected by the statutory bond, a provider of labor or materials must be a contractor, a subcontractor, or someone who has dealt directly with the subcontractor or contractor.  Thus, a supplier to the general contractor or a subcontractor may proceed against the bond but a supplier to a supplier (a materialman’s materialman) may not. Lyle Signs, Inc. v. Evroks Corp., 132 N.H. 156 (1989).

A subcontractor is not precluded from proceeding against the bond if the State is a party to the contract and has fully paid its general contractor. This is a significant difference between a mechanic’s lien and a statutory bond. A subcontractor’s mechanic’s lien will be discharged if the property owner has made full payment to the general contractor at the time the subcontractor’s notice is given. This is not the case with a statutory bond.

12. How do you get a copy of the bond?

If the State of New Hampshire is a contracting party, the person seeking to make a claim on the bond must file a statement of its claim in the secretary of state’s office within ninety (90) days after the completion and acceptance of the project by the contracting party.  N.H. Rev. Stat. Ann. § 447:17. If the New Hampshire Department of Transportation is a contracting party, the notice must be filed with the department. If a municipality is a contracting party, the notice must be filed in the office of the clerk of the Superior Court of the county within which the contract is principally performed. A copy of the statement of claim must be sent by mail to the office where it is filed to the principal and the surety.

A supplier to a subcontractor does not need to give advance notice of its intent to claim the benefits of the bond before filing a statement of claim. Naylor Pipe Co. v. Murray Walter, Inc., 120 N.H. 696 (1980). Moreover, a bond claim is not barred if claim is filed prior to completion and acceptance of the work.  General Elec. Co. v. Dole Co., 105 N.H. 477 (1964). The principal and the surety may waive the statutory notice requirement. Petition of Keyser, Inc., 97 N.H. 404 (1952). Like mechanic’s liens generally, failure to comply with the statutory provisions bars the bond claim. General Insulation Co. v. Eckman Const., 159 N.H. 601 (2010); Fastrack Crushing Servs. v. Abatement Int’l/Advatex Assocs., 149 N.H. 661, 666-67 (2003) (“Our law is well settled that in giving statutory notice the requirements of the statute must be strictly observed…. The claimant… must follow not just the purpose but the ‘plain and unequivocal language’ of the statute”) (quotations omitted); see also American Fidelity Co. v. Cray, 105 N.H. 132 (1963).

     A person who has complied with N.H. Rev. Stat. Ann. § 447:17 must, within one (1) year after such filing, file a petition in Superior Court for the county in which the contract was principally performed to enforce his or her claim or intervene in another petition already filed. N.H. Rev. Stat. Ann. § 447:18. A copy of the petition must be provided to the principal and the surety. N.H. Rev. Stat. Ann. § 447:18. The petition to enforce the bond claim must include an allegation of the nature and subject matter of the claim, the contract, or the indebtedness relied upon, of the execution and delivery of the bond, and of the facts showing that the petitioner has complied with N.H. Rev. Stat. Ann. §§ 447:17, 18.

     Any party in interest may file pleadings for the purpose of formulating issues under the direction of the court. The court examines all claims which have been duly filed and schedules a hearing on them, with notice to all creditors who have filed claims and to the principal and the surety or sureties. N.H. Rev. Stat. Ann. §§ 447:17, 18. After the hearing, the court finds the respective amounts due such party claimants and their rights to participate in the security and makes such orders and decrees as justice may require. N.H. Rev. Stat. Ann. §§ 447:17, 18. The court may require at any hearing on said claims the attendance of any official with whom claims have been filed, with such claims, or require such official to furnish a copy of such claims for the use of the court. N.H. Rev. Stat. Ann. §§ 447:17, 18.