When a plaintiff sues for money damages, he often seeks a lien or “attachment” on the defendant’s property – real estate being a particular favorite – 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 cover any contractual right to interest and attorneys’ fees.
Mechanic’s liens are perfected by attachments too. What if the plaintiff’s contract includes the right to collect interest and attorneys’ fees? Will the amount of his mechanic’s lien attachment include those things? Our Supreme Court has yet to address this, but my answer is No ―although I’ve seen it happen a few times when overreaching plaintiffs and inattentive judges crossed paths.
Ideally, a mechanic’s lien statute should tell us what triggers the lien, what property is subject to the lien, and what debts it secures. New Hampshire’s statute, RSA 447:2, is explicit on only first two of these: “If any person shall perform labor, provide professional design services, or furnish materials to the amount of $15 or more for erecting or repairing a house or other building or appurtenances, or for building any dam, canal, sluiceway, well or bridge, or for consumption or use in the prosecution of such work, other than for a municipality, by virtue of a contract with the owner thereof, he or she shall have a lien on any material so furnished and on said structure, and on any right of the owner to the lot of land on which it stands.” Compare Massachusetts’ lien statute, G.L. c. 254 § 2, which gives general contractors a lien “to secure the payment of all labor, including construction management and general contractor services, and material or rental equipment, appliances, or tools which shall be furnished,” and G.L. c. 254 § 4, which gives subs and suppliers a lien “to secure the payment of all labor and material, which he is to furnish or has furnished.” This answers the third question. See National Lumber Co. v. United Casualty & Surety Ins. Co., 440 Mass. 723, 802 N.E.2d 82, 86 (2004) (“our inquiry is limited to whether a mechanic’s lien recorded pursuant to G. L. c. 254, s. 4, includes contractual interest and reasonable attorney’s fees in addition to the amount claimed for labor and materials. We conclude that it does not.”).
In the absence of express statutory language, the clincher for me is the underlying “value added” theory behind mechanic’s lien statutes. 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 benefitted owner to unpaid contractor or supplier in recognition of the value they added to the property. Attorneys’ fees and interest, however, add no value to the property. They are tools for making the contractor and supplier whole, but not for transferring a benefit realized by an owner back to the provider of the benefit.
Admittedly the presumption that property values increase by the contract price of improvements does not always hold. I could have a piece of land worth $100,000 and hire you to build me a house at a price of $400,000 in the hope of having a $500,000 property when you’re done―but if you hit ledge digging the foundation hole and spend an extra $50,000 to remove it, I’ll owe you the extra $50K yet my home won’t be worth a penny more. Justice Stevens’ observation is apt here: “As in every rule of general application, the match between the presumed and the actual is imperfect,” but aberrations are “so unlikely to prove significant in any particular case that we adhere to the rule of law that is justified in its general application.” Arizona v. Maricopa County Medical Society, 457 U.S. 332, 344, 351 (1982).
Mechanic’s liens are perfected by attachments too. What if the plaintiff’s contract includes the right to collect interest and attorneys’ fees? Will the amount of his mechanic’s lien attachment include those things? Our Supreme Court has yet to address this, but my answer is No ―although I’ve seen it happen a few times when overreaching plaintiffs and inattentive judges crossed paths.
Ideally, a mechanic’s lien statute should tell us what triggers the lien, what property is subject to the lien, and what debts it secures. New Hampshire’s statute, RSA 447:2, is explicit on only first two of these: “If any person shall perform labor, provide professional design services, or furnish materials to the amount of $15 or more for erecting or repairing a house or other building or appurtenances, or for building any dam, canal, sluiceway, well or bridge, or for consumption or use in the prosecution of such work, other than for a municipality, by virtue of a contract with the owner thereof, he or she shall have a lien on any material so furnished and on said structure, and on any right of the owner to the lot of land on which it stands.” Compare Massachusetts’ lien statute, G.L. c. 254 § 2, which gives general contractors a lien “to secure the payment of all labor, including construction management and general contractor services, and material or rental equipment, appliances, or tools which shall be furnished,” and G.L. c. 254 § 4, which gives subs and suppliers a lien “to secure the payment of all labor and material, which he is to furnish or has furnished.” This answers the third question. See National Lumber Co. v. United Casualty & Surety Ins. Co., 440 Mass. 723, 802 N.E.2d 82, 86 (2004) (“our inquiry is limited to whether a mechanic’s lien recorded pursuant to G. L. c. 254, s. 4, includes contractual interest and reasonable attorney’s fees in addition to the amount claimed for labor and materials. We conclude that it does not.”).
In the absence of express statutory language, the clincher for me is the underlying “value added” theory behind mechanic’s lien statutes. 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 benefitted owner to unpaid contractor or supplier in recognition of the value they added to the property. Attorneys’ fees and interest, however, add no value to the property. They are tools for making the contractor and supplier whole, but not for transferring a benefit realized by an owner back to the provider of the benefit.
Admittedly the presumption that property values increase by the contract price of improvements does not always hold. I could have a piece of land worth $100,000 and hire you to build me a house at a price of $400,000 in the hope of having a $500,000 property when you’re done―but if you hit ledge digging the foundation hole and spend an extra $50,000 to remove it, I’ll owe you the extra $50K yet my home won’t be worth a penny more. Justice Stevens’ observation is apt here: “As in every rule of general application, the match between the presumed and the actual is imperfect,” but aberrations are “so unlikely to prove significant in any particular case that we adhere to the rule of law that is justified in its general application.” Arizona v. Maricopa County Medical Society, 457 U.S. 332, 344, 351 (1982).
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