A mechanic’s lien right is a powerful remedy to secure a contractor’s right to payment. Each jurisdiction’s mechanic’s lien statute is unique and most states strictly interpret/enforce the statutes. For multi-jurisdictional contractors, a common practice in New England, mechanic’s liens are a double-edged sword because they provide substantial leverage, but they are often costly and cumbersome to perfect. In the Solid Foundation blog, we will post regularly on issues relating to mechanic’s liens statutes throughout New England. As a start, we have put together this post that zeroes in on one fundamental requirement to preserve a general contractor’s mechanic’s lien in Rhode Island – the Notice of Possible Mechanic’s Lien pursuant to R.I. Gen. Laws § 34-28-4.1.
WHO SHOULD READ THIS POST?
- Contractors who perform work in Rhode Island for Owners.
WHAT A CONTRACTOR NEEDS TO DO TO PRESERVE ITS MECHANIC’S LIEN?
If you contract with an owner in Rhode Island and wish to preserve the right to claim a mechanic’s lien against the property, you must give NOTICE OF POSSIBLE MECHANIC’S LIEN. The required notice is given in the statute:
NOTICE OF POSSIBLE MECHANIC’S LIEN
To: Insert name of owner, lessee or tenant, or owner of less than the fee simple.
The undersigned is about to perform work and/or furnish materials for the construction, erection, alterations, or repair upon the land at (INSERT ADDRESS) under contract with you. This is a notice that the undersigned and any other persons who provide labor and materials for the improvement under contract with the undersigned may file a mechanic’s lien upon the land in the event of nonpayment to them. It is your responsibility to assure yourself that those other persons under contract with the undersigned receive payment for their work performed and materials furnished for the construction, erection, alteration or repair upon the land.
WHAT HAPPENS IF THE NOTICE IS NOT GIVEN? OWNERS, READ THIS SECTION.
Failure to provide this notice results in the contractor losing its ability to assert a mechanic’s lien for the labor and material supplied to the Project. If the contractor attempts to commence such a mechanic’s lien proceeding without providing the requisite notice, the owner may seek summary discharge and dismissal of the mechanic’s lien pursuant to R.I. Gen. Laws § 34-28-17.1 and potentially recover attorney’s fees per R.I. Gen. Laws § 34-28-19.
In addition to losing its mechanic’s lien rights, a contractor who fails to serve the Notice of Possible Mechanic’s Lien is required to indemnify and hold harmless the owner from any costs incurred on account of liens claimed by the contractor’s subcontractors or suppliers unless the owner did not yet pay the general contractor. R.I. Gen. Laws § 34-28-4.1
The subcontractors and suppliers of the general contractor do not have to file a notice of possible mechanic’s lien and their rights are not impacted if the general contractor fails to file such a notice.
WHEN AND HOW MUST THE NOTICE BE SERVED?
Contractors, you have two options:
- Incorporate the language “conspicuously” into a written contract. R.I. Gen. Laws § 34-28-4.1. As relevant here, Merriam-Webster defines “conspicuous” to be either “obvious to the eye or mind” or “attracting attention.” See https://www.merriam-webster.com/dictionary/conspicuous. To be safe, it is good practice to somehow emphasize the font of the text of the Notice of Possible Mechanic’s Lien in your standard owner contract or include it as an addendum that is appropriately emphasized. There is no requirement that the Owner acknowledge the notice, but that extra measure may avoid disputes as to whether the notice was conspicuous enough.
- Serve by Certified Mail, Return Receipt Requested Before the Work Commences. The Notice of Possible Mechanic’s Lien may also be served by certified mail at “any time prior to commencing work or delivery of materials for construction, erection, alteration or repair as set forth in this chapter.” I. Gen. Laws § 34-28-4.1. This sounds straightforward but this deadline can be easily missed when construction commence with limited notices to proceed and/or oral agreements to start preliminary aspects of the work as contract amounts and other commercial terms are being negotiated. If the work has begun, but the contract has not been executed, include the Notice of Possible Lien into the written contract with the owner.
While either option works equally well under the statute, I recommend that clients proceed forward with including the Notice of Possible Lien into the language of the written contract. This is where the remainder of the commercial terms are negotiated and difficult business decisions are made. It is also the time period during which owners are most likely to be represented by counsel. If communicated during this time with the benefit of a construction lawyer’s advice, the owner may be more likely to understand that the notice is not the filing of a mechanic’s lien, but a notice that the contractor is required by law to give to the owner if the contractor wants to preserve its statutory rights. In other words, reading the notice with the other contract boilerplate may be more palatable for an owner than receiving a certified letter about a mechanic’s lien out without notice at the start of a project. The amendment of your standard form contract or an industry AIA Contract Document is easy – just insert the above notice language from Section 4.1.
Taking this 15-minute step (perhaps less) may substantially increase your likelihood of getting paid through the enforcement of your rights pursuant to the Rhode Island’s Mechanic’s Lien Statute.