#56: Mechanic’s Liens on Condominium Common Area
Condominium ownership has been on the rise since the 1970s, and there are now over 800 condominium developments in New Hampshire ranging in size from two units to several hundred units. Condo owners own not only their units, but a proportionate share of the grounds, facilities and the like – so-called “common area.” Decisions on common area maintenance and improvements are typically made by a homeowners' association; see RSA 356-B:41,I (“Except to the extent otherwise provided by the condominium instruments, all powers and responsibilities with regard to maintenance, repair, renovation, restoration, and replacement of the condominium shall belong (a) to the unit owners' association in the case of the common areas . . .”). If an association contracts for common area improvements but doesn't pay for them, how does the contractor go about getting a mechanic's lien? The answer may surprise you.
RSA 356-B:8,II provides: “Labor performed or materials furnished for the common areas, if duly authorized by the association of unit owners or board of directors in accordance with this chapter, the declaration or bylaws, shall be deemed to be performed or furnished with the express consent of each unit owner and shall be the basis for the filing of a lien pursuant to the lien law against each of the units . . .” The apparent effect of this statute is to require an attachment of each of the unit owners' proportionate interests in the common area. Whether or not suing the condo association that hired you (rather than suing each unit owner separately) is an allowable way to seek a money judgment, liening the association's interest in common area will not work – for the simple reason that the condo association has no such interest. Only the unit owners do.
When there are numerous unit owners in the condominium, this can get cumbersome. A contractor, subcontractor or supplier who wishes to perfect a mechanic's lien will often be obliged to name and serve dozens of parties. A subcontractor or supplier who wishes to give notice of intent to lien will often be obliged to send dozens of notices. Writs of attachments must be recorded against dozens of names. And so on. As one court has noted, “the cost and delay inherent in identifying, pleading against, and serving a multitude of owners (and then substituting a new owner for a predecessor during the pendancy of the case as units are sold or otherwise transferred) would be substantial.” Trintec Const., Inc. v. Countryside Village Condominium Association, Inc., 992 So.2d 277, 280 (Fla. App. 2008).
Fortunately for contractors, condo associations are required by statute to raise the money to pay for common area improvements; see RSA 356-B:45,III (mandating that all common expenses “shall be assessed against the condominium units”). Unfortunately, “such assessments shall be made by the unit owners' association annually, or more often if the condominium instruments so provide” – and they rarely do so provide, so a contractor expense not budgeted for at the previous annual meeting may have to wait to be paid. Fortunately, such unbudgeted contractor expenses almost always result from casualties or accidents that are required to be insured against “to the full replacement value of the structures within the condominium, or of such structures that in whole or in part comprise portions of the common areas,” RSA 356-B:43,I(a). Unfortunately, “structures” likely do not embrace sitework (e.g., washouts or tree damage from severe storms), which is therefore not required to be insured against.
If a mechanic's lien is recorded, unit owners may “remove their unit and the percentage of undivided interest in the common areas appurtenant to such unit from the lien by payment of the fractional or proportional amounts attributable to each of the units affected,” RSA 356-B:8,II. But don't get too excited, contractors; this will typically happen only when there is a sale or a refinance afoot. Frankly, that scenario is the only way a mechanic's lien will ever provide leverage to a lienor – at least until someone figures out how to find a buyer of undivided proportionate common area interests at a sheriff's sale!