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The latest Q & A on a compliance issue, as provided by the League’s General Counsel at Norman, Hanson & DeTroy.
Question: We have a construction loan agreement with a Member who is having a house built, and the Credit Union has a mortgage on the house and land to secure the loan advances. The Member is having a dispute with his General Contractor (“GC”), with the GC claiming it is owed $35,000. The GC is also claiming that it has a lien on the Member’s real estate, i.e., the house and land related to this project. We have not seen anything recorded in the Registry of Deeds yet, so that means the GC does not have a lien, correct?
Answer: No. The GC’s lien rights are contained in Maine’s “mechanics’ lien statute,” which is found in Title 10, Section 3251-3269. Section 3251 provides that anyone “who performs labor or furnishes labor or materials . . . has a lien thereon and on the land on which it stands . . . to secure the payment thereof, with costs.” This lien arises the first day such labor or materials are provided and does not require any recording in the Registry for any lienholder that has a contract with the owner, as is the case with the GC and Member. However, the mechanics’ lien statute does require that any such lienholder must file a lawsuit within 120 days of the last day such labor or materials were provided to the project in order to preserve and enforce the lien. If the complaint is not timely filed, then the lien automatically dissolves. The GC’s lien would have priority over the Credit Union’s mortgage based on the Credit Union’s knowledge and consent (either express or implied) of the GC’s work.
For more compliance news, please visit League INFOSight through the Destination Compliance section of the Maine CU League’s website.