My Architect is Using a Lien Can I Continue Work With Other Contractors

A recent Missouri Court of Appeals case illustrates the importance of contractors, subcontractors, and design professionals ensuring that the work they are performing is pursuant to an original contract, or that the work is captured by an additional agreement, such as an executed change order or supplemental agreement, to protect their mechanic's lien rights.

Although there may be avenues by which a contractor, subcontractor, or design professional may still recover payment for additional work on either a breach of contract or quantum meruit theory, it may not be able to recover payment by asserting its mechanic's lien rights unless it ensures that all work performed on a Missouri project, if not a part of the original scope of work contracted for, is approved via executed change order, supplemental agreement, or other method provided for in the parties' original contract. If the additional work performed is not part of the original scope of work covered by the contract and is not approved by the requisite change order or supplemental agreement, the contractor, subcontractor, or design professional may not have lien rights for the additional work. Furthermore, the case demonstrates why is it generally advisable that contractors, subcontractors, and design professionals have documentation to support their agreements for additional work for purposes of proving that the additional work was performed pursuant to the original contract, an executed change order, or a supplemental agreement.

The Case: Bates & Assocs., Inc. v. Providence Bank, 590 S.W.3d 348 (Mo. App. E.D. 2019)

In Bates & Assocs., Inc. v. Providence Bank, 590 S.W.3d 348 (Mo. App. E.D. 2019),reh'g and/or transfer denied (Oct. 21, 2019),transfer denied (Dec. 24, 2019), the architect providing architectural design and construction services on a senior care facility project appealed the trial court's denial of the architect's claim for enforcement of its mechanic's lien. The trial court held that the architect's mechanic's lien could not be enforced because the lien was untimely. The appellate court affirmed the judgment.

The appellate court noted that Mo. Rev. Stat. § 429.015.1 provides that any architect who does any architectural work upon, or performs any architectural service directly connected with the erection or repair of any building or other improvement upon land "under or by virtue of any contract with the owner or lessee thereof," shall have a lien upon the building or other improvements upon the land to secure payment for the architectural services. (Note that § 429.015 also applies to engineers and landscape architects, and § 429.010 contains a similar requirement for contractors and subcontractors). Furthermore, any person seeking a lien under Chapter 429 of the Missouri Revised Statutes must, within six months after "the indebtedness shall have accrued," file with the circuit court a "just and true account" of the demand due that has given rise to the lien.  See § 429.080.  For purposes of this six-month lien filing deadline, the indebtedness is said to have "accrued" (and thus the clock begins to run) from the last day labor is performed under the agreement. Bates & Assocs., Inc., 590 S.W.3d at 352 (citingUnited Petroleum Serv., Inc. v. Piatchek, 218 S.W.3d 477, 481-82 (Mo. App. E.D. 2007)).

The architect argued that the additional work it performed on the project was pursuant to the original contract and so the indebtedness for all work performed on the project did not accrue – and thus the six-month lien deadline did not begin to run – until the last day this additional work was performed. The court, however, disagreed, because the original contract's plain language created a distinction between services included in the original contract and services for which the owner's "written authorization" was required.  The court held that the requirement of a separate written agreement for certain forms of additional work to be performed evidenced the parties' intent that these additional services not fall within the purview of the original contract absent written authorization.  Thus, because these additional services were not a part of the original contract, the additional work did not extend the filing deadline for the work actually performed pursuant to the original contract, and the mechanic's lien the architect sought to enforce was untimely.

Furthermore, because the additional work did not fall under the purview of the original contract, and the parties did not execute a supplementary contract to cover the additional work, the additional work was not lienable. The end result was that the architect lost lien rights to over $300,000 in performed work.

Key Takeaways: Mechanic's Lien Rights

For purposes of preserving Missouri mechanic's lien rights, Bates & Assocs., Inc. v. Providence Bank illustrates the importance of ensuring that all work performed on a project is covered by a valid contract, executed change order, or supplemental agreement in order to ensure that the work is lienable.  If the additional work does not fall within the purview of the original contract, then an executed change order, for example, will bring the additional work within the scope of the original contract and establish that the six-month deadline for filing a mechanic's lien does not begin to run until after the contractor's last day of work on the project which, because of the executed change order, will include the additional work.

In some cases (as was the case in Bates & Assocs., Inc.) the contract may mandate that a separate written agreement be entered into before certain forms of additional work shall be performed. If the original contract states that a separate written agreement is required for certain forms of additional work, failing to execute said agreement before performing the additional work may deem the work un-lienable, as it will not governed by any agreement between the parties as required by §§ 429.010 and 429.015. To protect its lien rights, a contractor, subcontractor, or design professional should always take care to ensure it is obtaining the requisite change order or supplemental agreement and authorization before performing additional work not provided for in the original contract.

This case also demonstrates the importance of correctly ascertaining when the last day of work performed pursuant to a contract is for purposes of determining when the six-month lien filing deadline has begun to run so that the contractor does not unwittingly allow the filing deadline to expire. It is not correct to assume that simply tacking additional work on to the end of the project will extend the lien filing deadline. As stated above, Missouri mechanic's lien law requires that the work be performed pursuant to the original contract or some other change order or supplemental agreement bringing the work within the scope of the contract.

An additional interesting issue in Missouri is whether a contractor can extend its lien filing deadline by performing warranty or repair work – i.e. correcting its own errors and mistakes – on the project.  Generally, if the work is performed and accepted as substantially complete, and then subsequent warranty or repair work is required, this subsequent work will not be lienable, and therefore does not extend a contractor's lien filing deadline. However, if the contractor is not intending to simply extend its mechanic's lien filing deadline but is performing work that is reasonably within the purview of the original contract, or is requested by the owner, and is necessary to completing the contract in a workmanlike manner, the indebtedness may be said to have accrued from the date of this work. As a contractor, subcontractor, or design professional, it is important to properly document work performed under the contract and never refer to this work as "warranty" work if it is in furtherance of performance of the contractual scope of work.

Key Takeaways: Right to Payment

It is important to note that even if the original contract provides that additional work can only be performed if first approved in writing or by supplemental agreement, a contractor that does not obtain this written authorization for additional work, but instead obtains verbal authorization, such as an oral change order, to perform the additional work, might still retain its right to payment and its mechanic's lien rights. Even where the original contract requires that additional work be approved by written change order or written supplemental agreement, Missouri courts have held that these contractual requirements may be waived if the party requiring the written change order has either (1) habitually accepted work completed upon oral change orders or (2) the parties agreed to an oral change order and the work was completed. While it is generally advisable to obtain written authorization before performing additional work for purposes of establishing that the work is pursuant to an agreement between the parties and to later support the lienor's "just and true account," failing to obtain written authorization does not necessarily nullify a contractor's mechanic's lien rights.

In conclusion, Bates & Assocs., Inc. v. Providence Bank reminds contractors, subcontractors, and design professionals who wish to protect their Missouri mechanic's lien rights to ensure that any additional work performed on a construction project is pursuant to a contractual agreement. Additionally, parties to a construction contract performing additional work should be wary of the strict six-month lien filing deadline, and not assume that any and all additional work performed on the construction project extends their filing deadline.

If you are interested in learning more about the requirements of a particular mechanic's lien law and how to best protect your right to assert a lien, please contact an attorney in Greensfelder's Construction Industry Group.

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Source: https://www.greensfelder.com/nuts-bolts-construction-law-blog/protecting-your-mechanics-lien-rights-reminders-from

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