This is the fourth in a series of posts addressing the protection of the right to payment in the construction industry using construction lien rights as a tool. Prior posts reviewed the information and analysis needed to identify available lien protections and the early notices many states require. This post highlights the fact that things are not always what they seem. Sometimes what looks like a lien claim is not and vice versa. It pays to ask more questions and to remember that state laws vary on what is a lienable contribution.
A lien claim generally requires a contribution to a “permanent” improvement to “real property”. Sometimes that project site is actually not lienable real property. The simplest example would be property which is publicly owned. This is where the public work surety bond laws would come into play.
A building project can have a mix of public and private interests which create an uncertain result. Where the work is a private structure on public land, or a public structure on private land the terms of the lease or other agreements involved are critical to decide which way that project falls. Who owns that private structure on leased public land when the lease ends? If the project is really net “public” should it have been bonded?
The real property interest that the contracting party enjoys can determine what is lienable. Beyond the simple fee titles there are other more limited interests in real property that may be lienable. A tenant’s leasehold interest is generally lienable and usually (but not always) the underlying title is also lienable. An easement is an agreement permitting someone to use or occupy property with a more limited bundle of rights. Some easements may be lienable and some may not. The recent tide of wind and solar electric projects employs a wide variety of land use arrangements from outright land ownership to leases and easements that make the parsing out of any possible lien rights a very complicated challenge.
Also be aware that the various American Indian Nations are sovereign entities. As such, their tribal lands are not subject to state construction lien laws and no lien rights are available.
Sometimes a lienable contribution is not “visible” at the project site. In most states, professional architects and engineers have liens for their work. Even when a project fails to come up out of the ground their design work may be treated as a “constructive contribution to a permanent improvement” giving rise to a lien claim– subject to a finding of sufficient consent or authorization of the design work by the property owner.
Sometimes that seemingly “permanent structure” is just personal property and not lienable. Leases can, again, hold surprises. An Illinois case involved a lien claim on a wind turbine tower. The court looked to the wind developer’s lease on the tower site. It found language obligating the developer to remove the tower from the surrounding farm land at the end of the lease. The court concluded that meant that the tower was personal property or a trade fixture on the land and not a lienable permanent improvement. Goodbye three million dollar lien.
Sometimes the lien claim might come as a complete surprise from “left field.” Union fringe benefit fund trustees can have lien rights for unpaid fringes as an extension of workers’ wages. Failure of a lower tier union subcontractor may result in a very surprising lien on a project.
While the general outline of states’ lien laws is predictable, the possible fact variations are many. Once the lien claimant zeros in on the location, timing and notice requirements for a lien, it is still necessary to take a close look at the project property and what is included in that claim to assure that it can pass muster when it meets the likely challenges by project owners and other interested parties. The next post will address some of those challenges.