Sometimes, however, there’s an exception that applies to certain parties who manufacture or supply specially fabricated materials. According to these exceptions, a mechanics lien can be filed for materials created, but not ever incorporated into the property, under certain conditions.  This post discusses what specially fabricated materials are, which states have the exception, and under what circumstances the exception applies.

Specially Fabricated Materials Defined

What exactly is a “specially fabricated material?”  Generally speaking, most states who define this term as “materials not generally suited for or readily adaptable to use” in a structure. As you can see, however, this leaves a lot of room for interpretation.

Specially Fabricated Materials are defined as materials not generally suited for or readily adaptable to use.

Most courts will apply a simple test to decide whether a material is specially fabricated, weighing these two factors:  (1) Were the materials specially ordered and specially fabricated for that specific project?; and (2) Can the produced materials be easily used in another structure?

Survey of State Laws Giving Specially Fabricated Materials Special Treatment

There are a handful of states that specifically discuss specially fabricated materials in their mechanic lien laws. These states typically allow a materialman to file a mechanics lien if they produce the materials, and after production, the materials are not incorporated into the property because the order is cancelled or interfered with by the property owner or general contractor.  Some of these states require a special “specially fabricated materials” notice be sent at the time an order is placed.

Here is a survey of the states with special rules on the books about specially fabricated materials.

Florida

In Florida, there isn’t a statute that excuses specially fabricated materials from the state’s general requirement that materials must be incorporated into the property to qualify for mechanic liens. However, the courts ahve carved out an equity exception to the general rules for specially fabricated materials, providing they are lienable even if they never arrive at the job site, so long as the materials were manufactured to order and the non-incorporation is the fault (either direct, or by direction) of the property owner.

The jurisprudence was established in Lehigh Structural Steel Co. v. Joseph Langner, Inc. by the 1949 Florida Supreme Court, when the court explained as follows:

We are cognizant of the rule that the Mechanics’ Lien Law should be construed so as to afford to mechanics and laborers the greatest protection compatible with justice and equity…And we have previously noted and approved the rule, followed in many jurisdictions, that the real property to be improved is subject to a lien for materials specially fabricated for such improvement under a contract directly with the owner of the realty when such materials are not used or delivered by the act or direction of the owner. There are strong equitable reasons for holding the owner’s property subject to a materialman’s lien in such cases.

Hawaii

Hawaii presents an interesting case, as the statutes do not clearly provide that a party may file a mechanics lien for specially fabricated materials not actually incorporated into the property’s improvement. However, the statutes do mention specially fabricated materials, and therefore, it can be reasonably interpreted to allow a lien in the event these materials are created and never used.

Nevertheless, the statute is not clear on this point, and there doesn’t appear to be any case law interpreting the same.  Here is what the statute says, within H.R.S. 507-41:

“Furnishing of materials” includes supplying of: materials incorporated in the improvement or substantially consumed in construction operations or specially fabricated for incorporation in the improvement; building materials used during construction but not remaining in the improvement, diminished by the salvage value of the materials…

Massachusetts

Massachusetts ALM GL ch. 149, § 29 has a special requirement for those supplying specially fabricated materials, and while the statute doesn’t clearly indicate a mechanics lien could be placed even if the materials were not incorporated into the property, this statute infers the same.

The statute requires that those providing specially fabricated materials must deliver a notice to the property owner within 20 days of when the order for materials is placed. Presumably, if the materials are produced and never incorporated, lien rights would still exist, as the need for the notice doesn’t apply once the specially fabricated materials are built and incorporated. Lawrence Plate and Window Glass Co. v. Varrasso Bros., Inc. At that point, the materialmen is treated like an ordinary material supplier without the notice requirement.

Therefore, the notice requirement is only there to preserve mechanic lien rights in the circumstance that the materials are never installed.

Montana

Montana has a statute dedicated to material suppliers and setting forth the specific circumstances when a materialman has mechanic lien rights, and this statute specifically addresses specially fabricated materials. Mont. Code Anno., § 71-3-524 provides:

(1) A lien for furnishing materials arises only if:
(a) (i) the materials are supplied with the intent that they be used in the course of construction of or incorporated into the improvement in connection with which the lien arises; and
(ii) the intent described in subsection (1)(a)(i) may be shown by a contract of sale, by a delivery order, by delivery to the site by the lien claimant or at the lien claimant’s direction, or by other evidence; and

(b) the materials are:
(ii) specifically fabricated for incorporation into the improvement and not readily resalable in the ordinary course of the fabricator’s business, even though the materials are not actually incorporated into the improvement;

Therefore, the supplier of specially fabricated materials may file a lien if the materials are never incorporated, but only under certain circumstances.  These circumstances in Montana, while statutorily provided, are really similar to the requirements elsewhere that are created by case law.

Nebraska

The rule in Nebraska is very similar to the rule in Montana, as both states specifically address specially fabricated materials in their statutes.  Again, the statutory rule in Nebraska (like Montana) is very similar to the standard created by case law in other states.

Quoting from the Nebraska statute, to file a mechanics lien for non-incorporated specially fabricated materials, the following is required: “Specially fabricated for incorporation in the improvements and not readily resalable in the ordinary course of the fabricator’s business even though not actually incorporated in the improvement.” Neb. Rev. Stat. § 52-134(1)(a)

North Dakota

Similar to the situation in Nebraska and Montana, North Dakota statutes build-in a reference to specifically fabricated materials, suggesting that lien rights exist in the state for material specifically fabricated for a project, but never actually incorporated therein.  The statute in North Dakota specifically provides as follows, in its definition of materials that materials include “custom or specially fabricated materials for incorporation in the improvement.”

Unlike the statutes in Nebraska and Montana, there is no specifying that the specially fabricated materials are worthy of a lien absent incorporation. However, since the statute specifically mentions specially fabricated materials and defines them as materials “for incorporation in the improvement,” it makes one wonder if there is an inference here that they are qualified for lien rights absent physical incorporation.

Tennessee

Tennessee Code Ann. §66-11-101(4)(A)(iii) includes in its definition of “furnish materials,” to “specially fabricate materials for incorporation in the improvement and, if not delivered to the site of the improvement, are not readily resalable by the lienor.”  This definition, like the definitions in some of the others states listed herein, make it evident that there are lien rights if specially fabricated materials are ordered, but not physically incorporated into the building.

Texas

The Texas Property Code provides a specific exception for specially fabricated materials to the general requirement that to file a lien, a supplier’s materials must be used in or delivered to the construction project. Section 53.0231(b) provides – quite clearly – that “A person who specially fabricates material has a lien even if the material is not delivered.”

Such clarity is surprising for a state whose lien laws are among the most complex in the nation.  Ah, but that is not all, of course.  To protect this right to lien for non-incorporated specially fabricated materials, the supplier must send a “Notice of Specially Fabricated Items” to the property owner.

All Other States

In this survey of specially fabricated mechanic lien laws, I’ve focused on those states that have statutes or cases mentioning these types of materials, and even further, allowing liens for the same. Just because a state doesn’t have a statute or a case addressing specially fabricated materials, however, doesn’t mean lien rights for these materials don’t exist.

As you can see in the case referenced under the above Florida discussion, providing lien rights to specially fabricated material suppliers is an equity exception to the state’s general incorporation rule. Every state who has an incorporation rule may, if the circumstances warrant, provide for such an equity exception.

Of course, there are some states who forbid such liens.  There are probably some other states that specifically allow these liens who have been overlooked in this post.  (Readers?  Lawyers?) However, this is a good survey of specific laws addressing this issue, and if you’re in a state not mentioned, you can probably apply the same equity principles to find a mechanics lien right.

This is a notice that the new law takes effect today, July 1, 2011.

Design professionals are happy with the change, as this brings Massachusetts into line with a large number of other states who offer mechanic lien protections to design professionals. As the folks at the Engineering Center point out in their press release about the change, specifically accommodating design professionals “eliminates ambiguities concerning liens” for these project participants.

Mention of these “ambiguities” is a good point, because they run rampart through mechanic lien laws in many states.

Determining who has mechanic lien rights on a construction project is an important first step to filing. Folks frequently ask whether they fall into a group without mechanic lien rights, and we’ve answered a lot of these inquiries on this blog. For example, can you file a mechanic lien without a written contract? Or can an equipment supplier file a lien? We’ve also generally discussed the question of who can file liens in Florida and Wisconsin.

In some states, design professionals are specifically included as a protect party under lien statutes, and in others they are specifically excluded. Problems arise when they are neither specifically included or excluded, and only those parties who “contribute” or “furnish materials/labor” to an improvement are protected. These types of statutes raise the question of whether the definition contemplates protection for an engineer or design professional. Oftentimes courts must look to the actual work performed by the design professional to make the call.

Before the passage of this new statute, Massachusetts’ mechanic lien law suffered from this ambiguity. Starting July 1, 2011, they join the ranks of those states who clearly provide lien rights to design professionals…and really, why shouldn’t these professionals have the right to file a lien?

Interested in reading the statute’s full text?  Click here: Chapter 424 of the Acts of 2010

There are a million materials out in the web-o-sphere to help those in the construction industry better understand the lien laws in their state.   Zlien offers some of these materials on its Lien Law Punchlist and Forms page (it’s free, by the way).

Ellen Rapport Tanowitz, a Massachusetts attorney, published a quick mechanics lien article on her Nine Points of Law Blog.  The post answers some basic (but commonly misunderstood) questions about liens and the lien process.

The author promises us a few additional articles more closely examining the Massachusetts lien law landscape, which is good reason for Massachusetts contractors, subcontractors and suppliers to keep an eye on that feed.    Take a look at the overview article referenced herein by vising the Nine Points of Law Blog.

The Massachusetts Builders Blog has recently posted a string of blog articles about mechanic lien laws in the state – they are must-reads for anyone doing construction in Mass.

• Who Can File A Mechanics Lien in Massachusetts
• The Strength of a Mechanic’s Lien
• Filing Mechanic’s Liens in Mass. – How to Avoid Mistakes
• Difference between Mechanics Liens and Real Estate Attachments

What we rarely comment upon is an owner’s perspective, who are concerned with the opposite:  figuring out ways to condemn a lien as improperly filed.

It’s important for those who usually file mechanic’s liens to step back and consider the opposing viewpoint.   There is some value in understanding that upon receipt of a lien, an owner’s will likely have the instinct of wanting to fight it as improper or unfair.

When lien laws are drafted, they are drafted with protection for property owners in mind.  And when contractor boards and other regulatory agencies commit time to lien laws, they are usually focusing on educating the public (i.e. property owners) on what they can do to prevent liens.

A December 2008 article from the Daily Journal of Commerce in Portland, Oregon, stands as an example of this.  In the article titled “Five Questions to Ask About Liens,” the author goes through five questions owners should ask when faced with mechanic’s liens to determine their rights on proceeding forward.

This is not a rare example.   To the contrary, regulatory agencies across the nation who regulate contractors focus a great deal of effort on helping owners understand and overcome improperly filed construction liens.  See the page for Department of Labor & Industries in Washington, or the Contractors State Licensing Board in California.

If your company does wind up filing an improper mechanic’s lien and its disputed by the property owner, a loss in court could require your company to pay penalties, attorneys fees and more.

The point?   It’s important to understand the lien laws in your jurisdiction, and avoid making common errors and mistakes.

Andrea Goldman, a construction attorney in Massachusetts, publishes a great blog about this very issue titled:  Home Contractor v. Homeowner.  She frequently posts on issues that surface in home construction between the property owner and contract that results in litigation or arbitration.

With all of the work across the nation from regulatory agencies attempting to stifle improperly filed mechanics liens, Andrea notes in her blog that mechanic’s liens are so powerful of a collection tool for contractors that even an improperly filed lien can yield non-payment.

In her post the “Strength of Mechanic’s Liens,” Andrea states as follows:

Even if the lien is not done properly, one still has to file an action in court to dissolve it, which requires paying legal fees that are frequently not recoverable.

And regardless of your position on the subject (as a property owner, contractor or regulatory board), and regardless of how right or wrong your position may be, Andrea’s point is clear.   Mechanic’s liens are powerful instruments, and even when they are filed with technical defects, they cause parties to consider the debtor’s claim and contemplate a resolution.