A Rhode Island Superior Court judge recently declared the state’s mechanics’ lien law unconstitutional, barring contractors from placing liens on properties on which they are owed money.
If it stands, the decision would have a huge impact on contractors and property owners in both the commercial and residential realm. Overturning the lien statute would be a major blow to the construction industry, taking away a law that has protected construction workers, tradesmen and laborers against being stiffed for work performed for more than a century.
Under the statute, contractors and subcontractors can place a lien on a property on which they are owed money for services rendered, up to four months after completing the work. The property owner cannot contest the right of the contractor to file the lien. Once filed, such lien cases typically take over a year to reach a courtroom. During that time, the property is held hostage to the lien: property owners who don’t pay off the lien can’t sell or even refinance the property until the situation is resolved. In many cases, properties with mechanics’ liens are sold at auction to pay off the lien, without the consent of the property owner.
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Mechanics’ liens are standard fare in the construction industry – one insider estimated there are currently 200 to 300 mechanics’ liens pending in the state.
Critics charge that many contractors use the statute as a trump card, essentially bullying property owners into paying for work that is substandard or hasn’t been performed at all. A caveat in the law that allows contractors to write up a lien for any dollar amount without outside analysis causes further outcry from critics.
“Contractors can just say, ‘Screw it. I’m going to slap a lien on them, hold them hostage.’ Many property owners choose to pay him off. It’s not cheap to go into court. It’s very expensive,” said Patrick J. Dougherty, the Providence lawyer who won the case.
But if the decision stands, that will effectively mean that contractors, subcontractors and suppliers no longer have any assurance of being paid for work performed in the event of a dispute with the property owner. That would be disastrous for the industry, say insiders.
“If the mechanics’ lien law disappears, it would have a devastating effect on those people who do this kind of work for a living,” said Girard Visconti, lawyer for Rhode Island Subcontractors Association. “When you weigh the scales of justice, you weigh the owners against the workers. Property owners already have other safeguards to protect them”
The court case arose when Robert and Linda Rossi sued the Wrentham, Mass.-based Sells/Greene Building Company and Providence-based Gem Plumbing and Heating Company, after the two contractors placed liens on the law office they built for the Rossis on Thurber Boulevard in Smithfield.
Over the course of construction, Robert Rossi said he found numerous problems with the work. When he refused to pay, the contractors put liens on the property.
Rossi took them to court with a lawsuit that argued that his constitutional right to receive a court hearing contesting the validity of the liens was violated.
“I said to the contractor, ‘I agreed to pay you to go according to plans, and apparently that’s not happening,’” said Rossi. “And what was the answer? They put a lien on the building. So my punishment for asking questions and making sure the building was safe was to have a lien slapped on me, but according to statute in Rhode Island, they had a right to do that. If ever there was an unfair, unjust situation, that has got to be it,” said Rossi.
Superior Court Judge Michael A. Silverstein agreed. Issuing a 29-page decision on April 23, he wrote that the mechanics’ lien statute unconstitutional because there are inadequate measures in the statute to protect property owners’ due process rights.
“This court finds that the mechanics’ lien statute is so lacking in minimal constitutional protections that the potential governmental burden that an additional procedural requirement would entail is far outweighed by the benefits incident to the fundamental principles of due process,” wrote Silverstein.
As this story went to press, Sells/Greene and Gem Plumbing had not filed an appeal to take the case to state Supreme Court. Neither party responded to a request for comment.
But a bill wending its way through the General Assembly could potentially satisfy all parties. The bill, written by the Rhode Island Subcontractors Association and sponsored by state Sen. Michael J. McCaffrey (D-Warwick), chairman of Judiciary Committee, gives rights to owners to ask for an accelerated hearing within three weeks and ask for hearing on validity of lien. At the same time, it gives a contractor or subcontractor security in the land in event that ultimately the court determines they have a valid lien.
The bill passed judiciary committee and is scheduled for a full Senate hearing.
Contractors are apparently hoping the bill passes, hanging their hardhats on what may be the last chance to save the legal protection for payment. Roger Warren, executive director of the Rhode Island Builders Association, said he believes the court opinion would stand up in appeals.
“I don’t anticipate it to be overturned. It’s been pretty much consistent
with decisions made in other states,” said Warren. “But this bill would provide
a remedy for defects in the law.”
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