Missouri Mechanics Lien & Shopping Malls
Missouri mechanics lien can attach to an entire mall, even though the work was done for just one tenant.
Missouri Mechanics Lien on a Shopping Mall
A general contractor is entitled to place a Missouri mechanics lien on real estate only if the work was performed pursuant to a contract between the contractor and the owner of the real estate, or between the contractor and the agent of the real estate owner. Typically, a mall tenant does not own the store space that it occupies within the mall. It leases the space from the mall owner. However, the tenant usually hires the contractor to perform work on the store. If the tenant is not the owner of the store space, then the contractor will have no right to place a lien on the real estate, unless the tenant is an agent of the mall owner. How do you know if the tenant is an agent of the mall owner? Look at the lease between the tenant and the mall owner.
Does the lease require the tenant to make improvements to the space leased by the tenant? If it does not, then the contractor may not be able to establish the tenant as the agent of the owner. If the lease does require improvements by the tenant, then the improvements must be “substantial and permanent in nature”. How do you know if the work will be substantial and permanent in nature? Let’s look at Crafton Contracting Co. v. Swenson Constr. Co for help.
Look to the Lease
In that case, the lease required Allen Edmonds to do a complete build out of its store at Plaza Frontenac. Specifically, the lease required Allen Edmonds to install a storefront, doors, flooring, wall and ceiling treatments, and to complete the AC, electrical, plumbing and fire suppression systems. The lease also gave Plaza Frontenac the right to approve of Allen Edmonds’ contractors and subcontractors. The improvements would then become the property of Plaza Frontenac, according to the lease.
Allen Edmonds hired Swenson Construction Company, Inc. to perform the above work in exchange for $207,398. Swenson Construction in turn hired Crafton Contracting Company (Crafton) and Vogel Sheet Metal and Heating, Inc. (Vogel) as subcontractors to perform some of Swenson Construction’s work. After the work was completed, Allen Edmonds paid Swenson Construction in full. Swenson went out of business and never paid Crafton or Vogel. Crafton and Vogel filed mechanics liens on the entire mall and then filed a lawsuit to enforce each lien.
The trial court found that the mechanic’s liens were unenforceable. The court said that Crafton and Vogel had not demonstrated that Allen Edmonds was the agent of Plaza Frontenac. Specifically, the trial court found that the work performed by Crafton and Vogel was not substantial, because the space leased by Allen Edmonds comprised less than one percent of the total area of the mall, and because the value of the work equaled less than two percent of the value of the mall. Crafton and Vogel appealed.
Missouri Mechanics Lien and Substantial Work
The court of appeals reversed the trial court’s judgment. The work was substantial merely by the fact that it converted a vacant store into an operational shoe store. Allen Edmonds was the agent of Plaza Frontenac, because the lease required Allen Edmonds to do the work, and because the work was substantial and permanent. As such, Crafton and Vogel were entitled to place mechanics liens on the entire mall.
Crafton and Vogel got lucky. If Allen Edmonds’ lease with Plaza Frontenac had not required Allen Edmonds to do the work performed by Crafton and Vogel, then Crafton and Vogel most likely would not have been entitled to place their mechanics liens on any part of the plaza, including the space leased by Allen Edmonds.
The Take Away
What’s the take-away? Contractors should get a copy of a tenant’s lease before entering into a work contract. (The tenant might obviously be reluctant to give you a copy of the lease. You might reassure the tenant by telling him that you just want to make sure the work is authorized and that the tenant can redact any sensitive information, like rent.) See if the lease requires the work and whether the landlord has the right to approve of the work. The contractor’s right to place a Missouri mechanics lien on the entire mall is strengthened if the lease requires this. This in turn should provide significant leverage against both the tenant and the mall owner if the tenant fails to pay for the work performed by the contractor.
The information provided in this article is for educational and informational purposes only. It is not intended as legal advice. You should consult an attorney experienced in Missouri’s mechanics lien laws about how the information in this article might apply to your own specific circumstances.
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© 2016 Michael Sewell
