Overview of Mechanic’s Liens in New Hampshire

April 10, 2023

The Quit Getting Screwed Construction Podcast (castos.com).

Please visit Attorney Karalynn Cromeens’ podcast where she interview Attorney Amann about mechanic’s liens in New Hampshire.  Attorney Cromeens is the Managing Partner at the Cromeens Law Firm, PLLC in Houston, Texas.

www.TheCromeensLawFirm.com

  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.

Licensing, however, often cannot be completed until you become bonded and insured, if you will be hiring employees that is. Having bond insurance informs clients that what they paid for will be completed, or that their money will be reimbursed. Check your local municipality to find bonding costs and requirements. Manchester, NH, for instance, requires a surety bond of $5,000 and a payment bond of $10,000, in addition to general liability insurance and workers compensation.

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 in Lieu 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.

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.

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.

SUBS–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.

N.H. Rev. Stat. Ann. § 447:8 also 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).  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.

3.  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 real property 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.  And while Mechanic’s liens, under RSA 447, are attachments too, RSA 447 does not provide for the inclusion of attorney’s fees and costs.     In the absence of express statutory language, it seems that the underlying “value added” theory behind mechanic’s lien statutes does not include for the liening of anything that is not strictly “labor or material”.  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.   Perhaps a separate attachment under RSA 511 for legal fees and costs can be brought in addition to a Mechanic’s Lien under RSA 447.

One thought on “Overview of Mechanic’s Liens in New Hampshire

  1. Lily Bridgers

    My friend is having problems being paid by a customer for construction work, and he knows that he needs legal help to safeguard his rights and collect the money owed to him. To handle the intricate legal issues and guarantee just remuneration for his services, he has come to realize how important it is to hire a mechanic lien lawyer. The mechanic’s lien legislation distinguishes between claimants who have a direct contract with the owner and lower-tier contractors (whose only relationship is with the general contractor or a subcontractor), which will be helpful to the claimant.

    Reply

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