New legislation has become a bit of a theme on the blog lately, and more change could be on the horizon. Massachusetts’ House Bill 3721 (“HB 3721”) is currently winding its way through the state’s legislature. If adopted, the bill would amend Massachusetts lien law to require a notice of identification, notice to owner, and provide a method for subcontractors and suppliers to formally request the property owner’s information. As evidenced by our recent legislative roundup, lien laws are frequently tweaked and patched in an effort to provide relief in construction payment. Under this proposed amendment, the changes to the Massachusetts notice system would provide greater transparency and clearer communication in the construction payment chain.
Massachusetts Lien Law and HB 3721
For ease of reading, let’s break this down into three sections: Notice of Identification, Notice to Owner – Residential Projects, and Information Request by Subs and Suppliers. All three provisions are currently included in HB 3721.
Notice of Identification
Under this new amendment, Massachusetts lien law would prohibit a first-tier subcontractor or supplier from filing a lien that exceeds the value of the prime contract at the time the Notice of Contract was signed unless they have provided written Notice of Identification. The Notice of Identification would be given within 30 days of commencement and sent by certified mail, return receipt requested in substantially the following form:
“Notice of Identification
Notice is hereby given to _________________, as owner, that ____________________, as subcontractor/vendor/design professional, has entered into a written contract with __________ to furnish labor or materials, or labor and materials, or rental equipment, appliances or tools to, or to perform professional services for a certain construction project located at ___ (Street Address), ___ (Town or City), Massachusetts. The amount or estimated amount of said contract is $ _________. (No amount need be stated for contracts for the rental of equipment, appliances or tools).
This notice is to advise you of your rights under Massachusetts law in connection with the improvement to your property. If we are not paid by your contractor, we can file a lien against your property for the price of our labor or materials. You have the right to pay us directly and deduct this amount from the contract price, or withhold the amounts due from your contractor until 90 days after completion of the improvement unless your contractor gives you a lien waiver signed by me (us).”
An amount stated in the above notice will not limit the amount of the lien, and inaccuracies in naming the contractor or other information won’t effect it’s validity as long as actual notice has been provided. If the notice is properly given, the amount of the lien could extend to the amount due or to become due under the original contract as of the date the owner receives the Notice of Identification (as opposed to the amount of the contract at the time that Notice of Contract was given).
Notice to Owner – Residential Projects
“(a) Any person or company supplying labor or materials for this improvement to your property may file a lien against your property if that person or company is not paid for the contributions.
(b) You have the right to pay persons who supplied labor or materials for this improvement directly and deduct this amount from our contract price, or withhold the amounts due them from us until 90 days after completion of the improvement unless we give you a lien waiver signed by persons who supplied any labor or material for the improvement and who gave you timely notice of identification and/or notice of contract as required under this section.”
The above notice would not be required if the property owner (or any co-owner) is substantially related to the contracted business.
Information Requests by Subs and Suppliers
Under this amendment, Massachusetts lien law would allow for subs and suppliers to request the name and address of the property owner. If such a request was made, in writing, the general contractor would have to provide the information within 10 days. If the general contractor fails to furnish that information, they will be liable for any actual damages sustained or expenses incurred by the sub or supplier arising from the failure to provide the information requested. Considering how complicated project identification can be, this should be a welcome change.
Poor communication and a lack of transparency are two of the leading reasons for the construction industry’s payment problem. Under this amendment, Massachusetts lien law would address both! With the above additions, property owners would have a much better understanding of who’s working on their property, and subs and suppliers would have access to the information necessary to enforcing payment. That sounds like a win-win.
For the current state of Massachusetts lien law, head over to our Massachusetts Construction Payment Resources.