Subcontractor on New Hampshire Project Granted $4.9M Lien
In a recent New Hampshire case, the subcontractor alleged the general contractor & owner withheld payments for completed subcontract work. The general contractor & owner tried several arguments, but failed to foil the subcontractor’s lien.
Read on to learn more about the court’s decision to uphold the subcontractor’s mechanic’s lien for $4,917,122.02.
In September 2014, property lessee, Lonza Biologics, Inc. (Lonza) hired general contractor, IPS-Integrated Project Services, LLC (IPS), for the design and construction of a manufacturing facility in Portsmouth, New Hampshire. IPS, in turn, hired subcontractor, Fraser Engineering Company, Inc. (Fraser), to furnish mechanical and plumbing services to the project.
59,845 Hours of Overtime?!
Apparently, by December 2015, IPS and Fraser discussed accelerating the project work, though Fraser was hesitant and warned of potential labor inefficiencies. Nonetheless, IPS told Fraser to put in the overtime and after several months of overtime, Fraser’s employees had clocked an additional 59,845 hours.
In August 2016, Fraser submitted a final invoice to IPS in the amount of $4,006,505.72, which included $3,324,083.30 in labor overtime and change orders for $682,422.42, plus retainage in the amount of $1,554,867.29. As you can imagine, IPS rejected this final invoice, so, in January 2017, Fraser served IPS & Lonza with a notice of intent to lien.
Time Out for The National Lien Digest
Here’s a quick review of the mechanic’s lien requirements for New Hampshire.
For private projects in New Hampshire, you should serve a preliminary notice upon the owner prior to your first furnishing. Then, you should serve a statement of account upon the owner at least once every 30 days, showing an account of materials or services furnished during the preceding 30 days for which payment has not been received. (Similar to a notice of non-payment.)
Did you serve the preliminary notice & subsequent statements of account, but still haven’t been paid? Under New Hampshire statute, you should file suit to establish and enforce the lien within 120 days from your last furnishing date. In other words, you can’t simply go to the recorder’s office & file a mechanic’s lien — you need to file suit with the court first.
Back to Fraser
Two days after serving its notice of intent, Fraser filed a motion with Rockingham County Superior Court to file a mechanic’s lien. The court granted Fraser’s motion – here’s the breakdown of the lien amount, as it increased from the final invoice Fraser had submitted to IPS:
“Fraser specifically sought a lien totaling $4,917,122.02, including $3,324,083.30 in unpaid man-hours resulting from the labor inefficiency, $682,422.42 caused changes to the scope of Fraser’s work, $593,155.13 in outstanding subcontract balance, and $317,461.17 in outstanding change order requests.”
Fraser’s mechanic’s lien was filed against the property; in this case, it attached to the leasehold (Lonza is the lessee).
IPS Objects: Timeliness, Waiver, Incorrect Lien Amount
IPS contested Fraser’s lien, claiming Fraser failed to file its lien timely, waived its right to lien and filed the lien for the incorrect amount. The court first addressed the issue of timeliness.
As I mentioned above, suit to establish & enforce the mechanic’s lien must be filed within 120 days of last furnishing. Fraser submitted its final invoice to IPS in August 2016, however, Fraser continued furnishing through October 2016.
“The subcontract required Fraser to tag valves and mark pipes. Fraser started this work on August 9, 2016. The work continued through at least October 3, 2016. All told, Fraser employees spent 1,199 hours tagging valves and marking pipes in August, September, and October 2016.”
IPS argued the furnishings at the end of September and beginning of October weren’t substantial furnishings. Fraser counter-argued that because the work in September/October was required by the subcontract, it should count towards a later last furnishing date.
After considering previous cases and New Hampshire statute (which is quite brief), the court determined Fraser filed its lien timely.
“Here, Fraser has presented evidence that its employees tagged valves and marked pipes for 1,199 hours over a nearly two-month period, concluding less than 120 days before the date Fraser sought to perfect its lien. Additionally, there is no dispute that the subcontract expressly required valve tagging and pipe marking. Given the remedial nature of the mechanics lien statute, and the absence of any authority compelling a different outcome, the court cannot conclude that this work was so de minimis that it did not extend Fraser’s lien. The court therefore overrules the defendants’ objections insofar as they contend that Fraser failed to timely perfect the mechanics lien.”
Next up, the court reviewed the argument that Fraser waived its lien rights. While this section of the decision is a bit murky, the court ultimately rejected IPS’ argument and determined Fraser did not waive its lien rights.
Lastly, the court tackled the claim amount. IPS argued “(1) that Fraser overstated its claim to include disputed amounts; (2) that the lien is limited by law to the amount Lonza owed IPS at the time of Fraser’s notice of lien; and (3) that Fraser’s claim prematurely includes unpaid retainage.”
Ultimately, the court declined to reduce the claim amount of the lien and rejected IPS’ argument that the lien was limited to the amount Lonza owed IPS ($1,866,961.87).
But, New Hampshire is an unpaid balance lien state, right? It is! Except, in this case, the owner’s contract with the general contractor does not identify a dollar amount, it simply states that Lonza would pay IPS for “the cost of trade labor including the indirect costs, overhead and profit for all [s]ubcontractors and equipment necessary for construction.” The court stated it could not determine the total due to IPS from Lonza and, therefore, declined to reduce Fraser’s lien amount.
So, That’s It?
Not quite. The court states the “merits” of Fraser’s claim have yet to be determined; these merits will be decided by an arbitrator. For now, Fraser’s lien remains in place for $4,917,122.02, because IPS failed to sway the court.
“It is up to the arbitrator, not this court, to determine the relative merits of Fraser’s claims and the defendants’ defenses to those claims…the court concludes that the defendants have not demonstrated that Fraser’s lien should be discharged or reduced. The court therefore overrules the defendants’ objections and grants Fraser’s motion to perfect the lien in the amount of $4,917,122.02.”