On September 24, 2010, the Norfolk Superior Court ruled in three separate (but consolidated) cases brought by three separate contractors against a condominium trust, that mechanics liens imposed by contractors are inapplicable in the condominium context and cannot be utilized to attach common areas and/or secure contractor claims for non-payment. The case involved 3 subcontractors who were not paid by a general contractor hired by the condominium trust to perform work at a condominium. The general contractor went bankrupt towards the end of the project and did not fully pay the subcontractors. With no chance of a recovery in bankruptcy, the subcontractors filed statutory mechanics liens against the condominium building and then filed lawsuits to enforce the liens against the condominium trust. The subcontractors also asserted claims for unjust enrichment against the condominium trust (i.e. that the condominium trust should pay the subcontractors since the condominium trust received the benefit of the work performed on the building).
The condominium trust moved to dismiss the lawsuit and dissolve the mechanics liens on the grounds that: (1) Section 13 of the Massachusetts Condominium Act prohibits the attachment of common areas to secure claims against a condominium board, and (2) the condominium trust was the party to the contract and does not own the common areas, but manages them for the benefit of the unit owners by statute. The condominium trust also moved to dismiss the unjust enrichment claims against the contractors on the theory that the subcontractors had written contracts with the now bankrupt contractor not the condominium trust and therefore it was not reasonable for them to expect payment from the condominium trust.
In deciding the case in the condominium trust’s favor, the Court (Troy, J.) noted and considered the competing (and somewhat inconsistent) interests protected by the mechanics lien statute and the condominium act. Ultimately the Court ruled that Section 13 of the Condominium Act prevented application of the mechanics lien statute in this context as the ultimate remedy of a mechanics lien case is foreclosure and that it would be inconsistent with the Condominium Act to allow a contractor to foreclose against a portion of the Condominium (i.e. common areas), where the common areas are not owned by the condominium trust, which is the party that contracted for the services in the first place. The Court analogized it as “akin to trying to insert asquare peg into a round hole”.
The case was handled by MEEB Attorneys Edmund A. Allcock and Katherine Brady. A copy ofthe Decision can be accessed at the following link.[Decision]