Can Construction Managers File a Mechanics’ Lien in the District of Columbia?
In recent years, a mechanics’ lien claimant who held a contract with an owner on projects in the District of Columbia may have received an unwelcome surprise when attempting to file its mechanics’ lien. If the claimant did not include physical labor in its description of work performed in the notice of intent to lien, there is a good chance the lien filing was rejected. This is surprising because the DC mechanics’ lien statute does not contain an express physical labor requirement. Nevertheless, the Recorder of Deeds, the District of Columbia office charged with recording lien and other land record filings, has refused to accept and record liens on this ground. The approach taken by the Recorder of Deeds has wide-ranging implications for contractors working in the District of Columbia.
Construction Managers vs. General Contractors
A “construction manager” that is “at risk” typically refers to a contractor that does not self-perform any work, but instead subcontracts and manages all of the work performed by the subcontractors. The term is frequently used in a negotiated procurement such as a cost-plus arrangement, perhaps with a guaranteed maximum price. Traditionally, a “general contractor” self-performed a portion of the work and subcontracted the remainder, usually in a competitive bid process. In recent years, these lines have become blurred because contractors have tended to subcontract and manage all the work. As a result, a physical work requirement, as applied by the DC Recorder of Deeds, could affect the ability of construction managers and general contractors to file a mechanics’ lien in DC.
DC’s Mechanics’ Lien Statute
Like most U.S. jurisdictions, the District of Columbia has created statutes regarding the ability of contractors to obtain a mechanics’ lien against a property. While DC’s statute is generally favorable to a contractor, the Recorder of Deeds has rejected the filing of mechanics’ lien claims where the contractor’s description of its work only included labor that was managerial, supervisory, and administrative in nature, not physical labor, and which did not otherwise involve supplying materials.
It is important to note that this physical labor requirement applied by the Recorder of Deeds does not appear in the statute. While D.C. Code § 40-301.01 generally provides a right to obtain a mechanics’ lien for a “contractor who contracted with the owner,” it does not define the term “contractor” to preclude work that is not physical labor. Section 40-301.02 sets forth the required contents of the notice of intent to lien, but does not specify or otherwise suggest a requirement that the labor be physical in nature and not supervisory. In fact, in requiring a description of services performed, this section uses the term “work done” instead of “labor.” The definition of “Project” in Section 40-301.03 includes “any work or materials provided,” which suggests that labor was not intended to be limited to physical labor. Moreover, the statute does not state that work that is managerial, supervisory, and administrative in nature is ineligible for a lien.
Does Moore v. Axelrod Support the Physical Labor Requirement?
In Moore v. Axelrod, 443 A.2d 40 (1982), the DC Court of Appeals held that a person who acted as a real estate broker and property manager was entitled to a mechanics’ lien because that individual alleged that he “contributed labor and materials which enhanced the value of [the] property.” In reversing that court’s dismissal of the broker/property manager’s mechanics’ lien claim, the appeals court rejected the owner’s argument that a real estate broker/property manager for the owner was not a “contractor” under the statute and not entitled to assert a lien. The court clarified that the “status as a real estate broker or property manager does not of itself entitle one to assert a mechanics’ lien against an owner’s property.” The court instead focused on the allegations that he had “contributed labor and materials which enhanced the value of [the] property,” specifically that he supplied labor and materials to rehabilitate and improve all sixty apartment units. So, while one could argue that the court required a physical labor requirement for the broker/property manager to obtain a lien, the court did not specifically address the nature of the labor provided as physical or supervisory. Similarly, the court did not address whether a construction manager/general contractor has no right to a lien if physical labor is not part of the work performed.
The interpretation that physical labor is required for a lien is a minority view that most states have not adopted. Locally, neither Maryland nor Virginia imposes such a requirement. Both allow architects or engineers providing on-site supervisory labor to obtain mechanics’ liens.
Consequences of the Physical Labor Requirement
As long as the Recorder of Deeds continues to interpret its role in accepting lien filings as including confirmation of the description of physical labor, construction managers (and potentially, general contractors) may have difficulty filing their mechanics’ liens. Unfortunately for such contractors, if the Recorder of Deeds rejects their lien filing on this basis, there is no formal judicial review process in place. However, there are other avenues of potential relief that can be considered, depending on the value of the lien. As a result, until this policy changes, contractors should, to the extent they can, include in their description of work any physical labor they contributed or any materials they supplied. In addition, contractors should make sure not to wait until the last day before filing their lien claim. It may take several days of conversation before the Recorder of Deeds agrees to file your lien claim, the ultimate validity of which will be determined later.
