Have a Lien Claim Arising from an Improvement to Leased Property? Aim for the Right Target.

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In most cases, the “owner” of a tenant improvement project is NOT the record owner of the real property, but rather the tenant who entered into the contract for the improvement.

That distinction can be critical when perfecting and enforcing mechanics liens in North Carolina.

Take, for example, the fireproofing contractor who asserted a mechanics’ lien enforcement action against both the landlord and the tenant of a leased premises in yesterday’s unpublished Court of Appeals decision in Century Fire Protection, LLC v. Heirs.

After settling claims with the tenant, the contractor continued to pursue the landlord in court, arguing that the tenant was serving as the landlord’s agent for the purposes of the improvement.  If true, such an agency relationship under North Carolina’s mechanics’ lien statutes would render the landlord the “owner” of the project.  Problem was, there wasn’t a shred of evidence supporting an agency relationship between the landlord and tenant.  The contractor could not prove that the landlord consented to the improvement, and it could not prove that the landlord was a party to the improvement.

The landlord brought these facts to the lien claimant’s attention over and over and over again throughout the litigation.  The contractor didn’t listen.  On the landlord’s motion for summary judgment, not only did the trial court judge dismiss the lien claim, he also awarded the landlord its attorneys’ fees under N.C. Gen. Stat. § 44A-35.  That statute permits the awarding of fees to the prevailing party in lien and bond actions when the non-prevailing party unreasonably refuses to resolve the lawsuit.  The Court of Appeals affirmed the trial court’s decision.

The moral of the story?  When you contract for improvements to leased property and need to enforce your lien rights to secure your entitlement to payment, aim wisely.  Be sure to file and enforce your lien against the proper party or parties.  Blindly suing a landlord who had nothing to do with a tenant improvement could result in you paying not only your own lawyer, but also the other guy’s.  An experienced construction attorney can help you determine what parties need to be included in a lien enforcement action.