12.12.17 Mechanic's Liens

Mechanic’s Lien Coverage Requires Underwriter Approval.

Priority

Can the Construction Loan have initial priority over mechanic's liens?

A contractor or subcontractor, including an architect or engineer, or a materialman or laborer, who performs work on or furnishes materials to real estate with the consent of the owner or lessee is afforded a lien ("mechanic's lien") against the real estate. Sections 34-28-1, 34-28-2 and 34-28-3. A mechanic's lien attaches upon the commencement of the work or furnishing of materials. Art Metal Construction Company v. Knight, 56 B.I. 228,185 A. 136 (1936); Blackmar v. Sharp, 23 R.I. 412, 50 A. 852 (1901). A mechanic's lien is void and wholly lost unless the holder of the lien records a notice of intention in the land evidence records of the city/town where the real estate is located using the form specifically set forth in the statute before or within 120 days from the performance of the work or furnishing of materials and mails a copy of such lien to the owner of record of the land before or within the 120 day period. See Section 34-28-4.

Will initial priority as to future disbursements be retained only if certain procedures are followed?

There are statutes governing future advances under a construction loan mortgage in Rhode Island. If a mortgage was filed prior to commencement of construction, additional obligatory advances under that mortgage will have priority. The mortgage must be entitled "Mortgage to Secure Present and Future Loans under Sections 34-25-1 -- 34-25-5" and contain provisions that it is intended to secure present and future loans and state a maximum amount of loans to be secured. R.I. Sec. 34-25-1 through R.I. Sec. 34-25-5

If priority is lost, can it be regained?

No.

Is there a difference between on-site and off-site work?

There is no statutory difference between on-site and off-site work.

Is priority the same for all contractors and subcontractors on the same project?

All mechanic's lien claimants have equal priority with each other and share pro rata in the distribution of funds or proceeds from any sale. R.I. Gen Laws Sec. 34-28-25.

Time Limits

What are the time periods for recording lien claims by original contractors and subcontractors?

Persons who do work or furnish materials must mail a certified or registered notice to the record owner within 120 days of the time that they did work or furnish materials if they intend to claim a lien. The notice must also be recorded within this 120 day time period. R.I. Sec. 38-28-4

After what period of time can you waive a mechanic's liens if no suit is filed?

If a petition to enforce a notice of intention is not filed within 120 days of the filing of the notice, the mechanic's lien is void and of no force or effect. R.I. Sec. 34-28-9

Removing or Waiving Liens

Is there a statutory procedure for affidavits of completion or notices of completion?

There are no statutory procedures for affidavits or notices of completion.

Can a statutory bond terminate the mechanic's liens as an encumbrance on the title?

Yes. At any time after the recording of a notice of intention to file a claim or after the filing of a petition to enforce a lien pursuant to R.I. Sec. 34-28-10 and 34-28-13, the owner may pay into the registry of the court cash equal to the total amount of the notice of intention or deposit a bond of a surety company licensed to do business in Rhode Island running to all person claiming liens. R.I. Sec. 34-28-17

Can the original, general, or subcontractors by contract or waiver agreement subordinate or waive mechanic's liens by general contractor and/or subcontractors?

A general or subcontractor may release their notice of intention by a recorded subordination or release agreement. R.I. Sec. 34-28-26

Can a bona fide purchaser or bona fide lender take free of mechanic's liens later filed for earlier work?

No.

Title Company Requirements

What are the customary requirements for issuing Loan Policies on construction loan mortgages?

No information available.

Is it customary to add a "pending disbursement" clause or mechanic's liens exception in the Loan Policy insuring a construction loan mortgage?

No information available.

Also subject to any bulletins relating to mechanic’s liens.