MECHANICS' LIEN LAWS
Sec. 67. Nature. Mechanics' lien laws are the result of legis-
lation which make possible liens upon real estate, where such real
estate has been improved. The purpose of such legislation is to
protect the laborer and materialman in the event of the insolvency
of the owner or the contractor. The laws of the states vary slightly
in the protection accorded and the procedure required to obtain it.
For these reasons, the laws of the individual state should be con-
sulted in a particular instance. The sections which follow relate to
provisions which are generally found in the various state laws.
Sec. 68. Persons entitled to lien. Those persons are entitled
to a lien, who, by either express or implied contract with the owner
of real property agree: (1) to deliver material, fixtures, apparatus,
machinery, forms, or form work to be used in repairing, altering, or
constructing a building upon the premises; (2) to fill, sod, or do
landscape work in connection with the same; (3) to act as archi-
tect, engineer, or superintendent during the construction of a build-
ing; or (4) to furnish labor for repairing, altering, or constructing
Those parties who contract with the owner, whether they furnish
labor or material, or agree to construct the building, are known as
contractors. Thus, practically any contract between the owner and
another, which has for its purpose the improvement of real estate,
gives rise to a lien on the premises in favor of those responsible for
the improvement. To illustrate : A contract to attach a permanent
fixture to a building or one to beautify a lawn would create a lien
in favor of the contractor.
In addition to contractors, anyone who furnishes labor, mate-
rials, or apparatus to contractors, or anyone to whom a distinct part
of the contract has been sublet, has a right to a lien. These parties
are customarily referred to as subcontractors. Their rights differ
slightly from those of contractors, and some of these differences will
be considered in later sections.
In order that a lien for materials may be maintained, the mate-
rial must be furnished directly to the contractor or subcontractor. 1
In addition, a record of the material furnished on each job is usually
required. This procedure is necessary for two reasons: first, the
record is essential to accuracy in the determination of the amount
"Hightower v. Bailey et al., 19CO, 1CS Ky. 198, 56 S.W. 147; p. 823.
426 REAL PROPERTY
of the lien ; and, second, it is evidence that the contractor is not his
own materialman. If the material is sold on the general credit of
the contractor and no record of the deliveries is kept, title passes tc
the contractor and he becomes his own materialman.
The lien of a party furnishing building material arises as soon as
the material is delivered to the premises. 2 On the other hand, one
who supplies equipment or machinery receives a lien only if he can
show that the goods delivered have become a part of the completed
Sec, 69. Against whom does the lien arise, Any interest in
real estate may be subjected to a lien. A fee simple, a life estate,
or a lease for years may have a lien against it, depending on the na-
ture of the contract. If the owner of the fee simple contracts for
the construction, or authorizes or knowingly permits the improve-
ment to be made, the lien is good against his interest as well as
against the improvement. If a lessee, without the consent or
knowledge of the owner, contracts for the construction or improve-
ment of property, the lien arises only upon the interest of the lessee,
To illustrate : A leases a vacant lot from 5, with the understanding
that A is to construct a building on the premises. Any lien cre-
ated will affect the interests of both A and B. If A had not ob-
tained B's consent to erect the building, the lien would have been
created against the interest of A only.
The improvement of real property should not give to the lien
holder a right to disturb or destroy a prior mortgage. At the same
time, there is no occasion to increase tibo protection of the mort-
gagee at the expense of the lien holder. Consequently, an existing
mortgage is always given a superior lien on the value of the prop-
erty in its unimproved state. In many states, however, if the im-
provement, or its value, can be segregated, the mechanic's lien will
be superior on the improvement. Where separation is not feasible,
a method of appraisal is usually provided for, to determine what
portion of the proceeds, at time of sale, are derived from the im-
Sec. 70. Formalities required to perpetuate lien. Under the
law of most states the contractor's lien arises as soon as the contract
is entered into. In order to protect the contractor against claims of
innocent third parties who might purchase the property or obtain
a mortgage thereon, the law provides that the lien must be made a
matter of record within a certain time, usually four months after all
work is completed. As between the owner and the contractor, how-
"Moorhead Lumber Co. v. Remington, 1925, 165 Minn. 411, 206 N.W. 653;
MECHANICS' LIEN LAWS 427
ever, the time limit may be extended somewhat beyond this period.
During the four month's period, the lien is good against innocent
third parties even though it is not recorded.
To establish their liens, the subcontractors rnaterialmen, labor-
ers, and others must, within a relatively short period of time after
they have furnished the last of their materials or labor, either make
the liens a matter of record, or serve written notice thereof on the
owner, according to the particular state statute. The period most
frequently mentioned by the various states is sixty days.
Sec. 71. Protection accorded the owner. The mechanics' lien
law usually states that the owner shall not be liable for more than
the contract price, provided he follows certain procedure outlined
in the law. The law further provides that it shall be the duty of the
owner, before making any payments to the contractor, to obtain
from the latter a sworn statement setting forth all the creditors
and the amounts due, or to become due, to them. It is then the
duty of the owner to retain sufficient funds at all times to pay the
amounts indicated by the sworn statements, provided they do not
exceed the contract price. In addition, if any liens have been filed
by the subcontractors, it is the owner's duty to retain sufficient
money to pay them. He is at liberty to pay any balance to the
contractor. If the amount retained is insufficient to pay all the
creditors, they share proportionately in the balance, except that
most of the states prefer claims of laborers. The owner has a right
to rely upon the truthfulness of the sworn statement. 8 If the con-
tractor misstates the facts and obtains a sum greater than that to
which he is entitled, the loss falls upon the subcontractors rather
than upon the owner. Under such circumstances, the subcontrac-
tors may look only to the contractor to make good their deficit.
Payments made by the owner, without first obtaining a sworn state-
ment, may not be used to defeat the claims of subcontractors, ma-
terialmen, and laborers. Before making any payment, it is the
duty of the owner to require the sworn statement and to withhold
the amount necessary to pay the claims indicated.
Where the contractor is willing, the owner may also protect him-
self by stipulating in the construction contract a waiver of the con-
tractor's lien. A waiver of lien by the contractor also waives the
lien of the subcontractors, as they derive their rights through those
of the contractor. Certain states require the owner to record such
a contract before subcontractors begin work, in order that the agree-
ment may bar their right to a lien.
3 Knickerbocker Ice Co. v. Halsey Bros. Co., 1913, 178 111. App. 629; p. 824.
428 REAL PROPERTY
Review Questions and Problems
1. What is the purpose of the mechanics' lien law? Who may take
advantage of it?
2. A agreed to furnish material and to install a heating plant for B at
a cost of $300. B advanced to A $200 with which to buy the material.
The material was purchased on credit and A used the money for other
purposes. A failed to complete the work, and B was compelled to pay C
$150 for completing the job. May the materialman maintain his lien?
3. A rented a plot of ground from B, with the understanding that A
might have buildings constructed thereon, such as were necessary to the
operation of an amusement park. The buildings were constructed under
contract with A, but the various contractors were not paid. May they
maintain a lien against B?
4. A agreed with C to have the latter build a house at a cost of $4 7 000.
The house was completed on January 15. On February 1 the property
was sold to B, who had been informed by A that all contractors' bills
had been paid. As a matter of fact C had' received no money. May C
file his lien as against Bl
5. How may the owner protect himself against paying more than the
6. A contracted to place an asbestos curtain in B's theater. Is A en-
titled to a lien?