Topic:
LIENS;
Location:
LIENS;
Scope:
Program Description; Connecticut laws/regulations;

OLR Research Report


Connecticut General Assembly



OFFICE OF LEGISLATIVE RESEARCH

October 2, 2003 98-R-0280

TO:

FROM: George Coppolo, Chief Attorney

RE: Mechanic's Lien—Subcontractors

You asked for a summary of the mechanic's lien law.

SUMMARY

A mechanic's lien is a claim, created by statute, to secure payment for work performed or materials furnished to erect or repair a building or improve land. The underlying purpose is to encourage construction and building repairs and to protect contractors, subcontractors, and suppliers by trying to ensure that they will be paid for services rendered and materials provided.

The lien takes effect when the contractor begins to furnish materials or perform services. To be valid, the lien must be filed on the land records of the town where the land is located within 90 days after the contract or subcontractor has ceased performing services or furnishing materials. A mechanic's lien take precedence over other liens which are filed after it takes effect. The lien can be enforced by foreclosure in the same way that a mortgage is foreclosed. If the land owner does not pay the amount secured by the lien, the contractor or subcontract can force a sale of the property and get paid from the proceeds.

A mechanic's lien for a subcontractor cannot exceed the amount that the owner agreed to pay the contractor who hired the subcontractor. Also, the owner must be credited with all payments he made to the contractor before he had notice of the subcontractor's lien.

MECHANIC'S LIEN CLAIMANTS

The statute allows a mechanic's lien on buildings and land for anyone who has a claim over $10 for materials furnished or services rendered in construction, raising, removal, or repairs of any building or its appurtenances or in lot improvement, site development, or plot subdivision if the claim results from the owner's consent (CGS 49-33(a)). The claim takes precedence over any other encumbrance originating after the commencement of the services or furnishing of the materials (CGS 49-33(b)).

If two or more persons have mechanic's liens in connection with the same job, none has any priority over the others except as follows (CGS 49-33(c)). If another kind of valid encumbrance other than a mechanic's lien is filed while the work is continuing, all the mechanic's liens originating before the filing of that other encumbrance have priority over that encumbrance, but no such mechanic's lien has priority over any other such mechanic's lien. That encumbrance and all such mechanic's liens take precedence over any mechanic's lien for materials furnished or services rendered after the filing of that encumbrance. But no one of the mechanic's liens originating after the filing of that encumbrance has precedence over another. If a lienor waives or releases his lien or claim of precedence to that encumbrance, that lien is classed with and has no priority over liens originating subsequent to that encumbrance (CGS 49-33(d)).

A mechanic's lien cannot attach in favor of a subcontractor for more than the amount that the owner has agreed to pay any person through whom the subcontractor claims subject to the apportionment rules (CGS 49-33(a)).

The law requires that a subcontractor must be subrogated to the rights of the person through whom the subcontractor claims. But the subcontractor has a mechanic's lien or right to claim a mechanic's lien in the event of a default by that person, provided the total of such liens cannot attach to the property for more than the amount by which the contract price between the owner and the person through whom the subcontractor claims exceeds the reasonable cost of satisfactory completion of the contract plus damages resulting from such default and all bona fide agreements made by the owner before receiving notice of such lien or liens (CGS 49-33(f)).

If the building is removed, the mechanic's lien does not take precedence over any encumbrance on the land which accrued before the building was removed (CGS 49-33(g)).

RECORDING AND NOTICE REQUIREMENTS

A mechanic's lien can be foreclosed in the same manner as a mortgage (CGS 49-33(h)). In order for a mechanic's lien to be valid, the person performing the services or furnishing the materials must:

1. within 90 days after he has ceased to furnish the materials or perform the service, lodge with the town clerk in the town where the property is located a certificate in writing (which the town clerk must record with deeds of land) (a) describing the premises, the amount claimed as a lien on them, the name of the person against whom the lien is being filed, and the date the performance of services or furnishing of materials began; (b) stating that the amount claimed is justly due; and (c) subscribed and sworn to by the claimant; and

2. within the same time or prior to the lodging of the certificate but not later than 30 days after lodging it, serves a true and attested copy of the certificate on the owner (CGS 49-34).

No one other than the original contractor or a subcontractor whose contract with the original contractor is in writing and has been agreed to in writing by the other party to the original contract is entitled to claim a mechanic's lien unless, after commencing and not more than 90 days after ceasing to furnish materials or render services, he gives written notice to the owner and to the original contractor that he has furnished materials or rendered services and intends to claim a lien for that on the property. But the law says an original contractor is not entitled to receive this notice unless, not later than 15 days after beginning his work, he lodges with the town clerk where the property is located an affidavit in writing (which the town clerk records with the land deeds) stating the name under which he does business and his business address and describing the property.

The notice must be served on the owner or original contractor, if they reside in the same town where the property is, by any indifferent person, sheriff, or other proper officer, by leaving a true and attested copy of it at their residence. If they reside out of town, but have a known agent in town, the notice can be served on the agent. Otherwise, it can be served by mailing a true and attested copy of the notice by registered or certified mail to the owner or original contractor at their residence. If the copy is returned unclaimed, notice must be given by publication. The notice, with the return of the person who served it endorsed on it, must be returned to the original maker of the notice within the above 90-day period (CGS 49-35(a)).

No subcontractor, without a written contract complying with the provisions above, and no one who furnishes material or renders services under a contract with the original contractor or subcontractor, can be required to obtain an agreement with or the consent of the property owner as provided above, to enable him to claim a mechanic's lien (CGS 49-35(b)).

HEARING PROCEDURES

When a mechanic's lien is placed on a property, the property's owner can apply to the Superior Court or to any judge of the Superior Court for a hearing to determine whether the lien should be discharged or reduced. The court or judge must order reasonable notice of the application to be given to the named lienor and to other owners, if they are not a party to the application, and must set a date for the hearing. If any of the parties reside out of state, the notice must be given by personal service, registered or certified mail, publication or such other method as the court or judge directs. At least four days notice must be given prior to the hearing date (CGS 49-35a (a)). The law specifies the form for the application, order, and summons (CGS 49-35a (b)).

When the hearing is held, the lienor must first establish that there is probable cause. Anyone entitled to notice can appear and be heard and prove that the validity of the lien should not be sustained or that the amount is excessive and should be reduced. The court or judge can:

1. deny the application or motion if probable cause is established that the lien is valid;

2. order the lien discharged if probable cause is not established or if its invalidity is established by clear and convincing evidence;

3. reduce the amount of the lien if it is found to be excessive; or

4. order the lien discharged or reduce its amount conditioned on the posting of a bond set by the judge, sufficient to indemnify the lienor for any damage that may occur from the discharge or reduction (CGS 49-35b(a)).

APPEALS

An appeal must be filed within seven days of the decision. The effect of the order is automatically stayed for the seven days. Within that period, the party appealing can file an application with the clerk of the court, requesting a stay of the order pending the appeal and listing the reasons for the request. The applicant must send a copy of the application to all the other parties. Upon filing of the application, the effect of the order is further stayed until a decision is made on it. A hearing on the application must be held promptly. The order must be stayed if the party appealing posts a bond. After the hearing, the court can set a bond, grant a stay, deny the stay, or condition the granting of the stay on the giving of a bond. Any order of discharge, reduction, or stay takes effect when a certified copy is recorded on the land records in the town where the lien was originally recorded (CGS 49-35c).

PROPORTIONATE CLAIMS

The law says that no mechanic's lien can attach to any property in favor of anyone to a greater amount than the price which the owner agreed to pay for buildings or the development of the lot. When there are several claimants and the amount of their total claims exceeds that price, the claimants, other than the original contractor, must be first paid in full, if the amount of that price is sufficient, but if not, the funds must be apportioned among the claimants, other than the original contractor, in proportion to the amount of the debts due them. The court can direct the manner in which the claims are paid. In determining the amount for which a lien can attach, the owner must be allowed whatever payments he has made, in good faith, to the original contractor, before receiving notice of the lien. No payments made in advance of the time stipulated in the original contract can be considered as made in good faith, unless the owner gives notice of intention to make the payments in writing to each person known to have furnished materials or rendered services at least five days before he makes the payment (CGS 49-36).

DISSOLUTION OF LIEN OR SUBSTITUTION OF BOND

Whenever a mechanic's lien has been placed on real estate, the owner or any interested person can apply to a judge of the Superior Court for the lien to be dissolved on substitution of a bond, and the judge must order reasonable notice of the application to be given to the lienor. If the lienor is not a Connecticut resident, the judge can order that notice be given by publication, registered or certified letter, or personal service. If the judge is satisfied that the applicant plans, in good faith, to contest the lien and the applicant offers an adequate bond, the judge must order the lien dissolved and substitute the bond for the lien. If the applicant, within 10 days, causes a copy of the order, certified by the clerk, to be recorded in the town clerk's office where the lien is recorded, the lien is dissolved. If a bond is substituted after an action for foreclosure of the lien is begun, the plaintiff in the foreclosure can amend his complaint, without costs, to make the action apply to the bond, with which he can join an action to recover on his claim. When a bond substitution occurs before the foreclosure action has begun, the plaintiff can join the action on the bond with an action to recover on his claim. Whenever a bond is substituted, the action to recover on the bond has to be brought within one year from the lien certificate's recording date, or the bond is void (CGS 49-37).

After the substitution, the law gives the principal or surety on the bond an opportunity to apply to the court for a hearing on whether the lien for which the bond was substituted should be declared invalid or reduced in amount. The court must then set the date for the hearing and provide for at least four days' notice to the parties prior to the hearing. Hearing procedures are essentially the same as described above. Any order resulting from these applications is considered a final order for appeal purposes (CGS 49-37).

DURATION OF LIEN VALIDITY

The law prohibits a mechanic's lien from continuing in force for a longer period than one year after the lien has been perfected, unless the party claiming the lien begins an action to foreclose it and records a notice of lis pendens on the land records of the town where the lien is recorded within one year from the date the lien was recorded or within 60 days of any final disposition of an appeal, whichever is later. When the one-year or 60-day period expires, without any action commencing, the lien is invalid and discharged as a matter of law. An action to foreclose a mechanic's lien is privileged in respect to trial assignment (CGS 49-39). When these time limits expire, the lien is automatically extinguished and its continued existence without a release on the land records in no way affects the owner's title or the property's marketability (CGS 49-40a).

The law sets out procedures for discharging liens that are invalid but not discharged of record (CGS 49-51).

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