Articles

“No Lien” Clauses: Are They Enforceable?

A “no lien clause” in a construction contract forces a contractor (or subcontractor or supplier) to give up its lien rights in advance of performing the construction work and/or supplying materials on a project.   In other words, the contractor promises that it won’t lien the project in the event of non-payment.

A typical “no lien clause” may read:

As a condition of Owner entering into this Contract with Contractor, Contractor agrees that it shall not assert rights to or claim a lien, or encumbrance of any type or kind, including any mechanic’s lien on any portion of the land, buildings, equipment, fixtures, or materials that constitute or form a part of the Project.

These types of provisions are extremely owner-friendly.  In signing a contract with a “no lien clause”, a contractor forfeits one of its most powerful rights.  The contractor agrees to perform work without the security of a potential mechanic’s lien and, therefore, is exposed to greater risk of non-payment on the project.   In bidding for work, contractors often lack the leverage to resist owners that insist on including a “no lien clause” in their contracts and are forced to deal with these types of provisions.

It is important to note, however, that in many states these types of agreements are unenforceable.  For example, in Vermont, state law provides that a mechanic’s lien “may not be waived in advance of the time such labor is performed or materials are furnished and any provision calling for such advance waiver shall not be enforceable.”  Similarly, Massachusetts state law declares that such clauses are “against public policy” and “void and unenforceable.”  Connecticut state law follows suit by declaring that any provision “that purports to waive or release the right of a contractor, subcontractor or supplier . . . to . . . claim a mechanic’s lien . . . for services, labor or materials which have not yet been performed and paid shall be void and of no effect.” In short, in many states, a “no lien clause” will have no effect on a contractor’s ability to lien a project.

Unfortunately, in Maine, the law is not so clear.  Maine’s mechanic’s lien statutes do not address whether a party can waive its lien rights in advance of performing work.  Moreover, as of the date of this article, there is no published court decision that directly addresses this issue.  While there are sound public policy reasons that would support prohibiting the use of a “no lien clause” (e.g., protecting contractors’ payment rights, preventing unfair dealing on the part of project owners), until the issue is presented to a court for consideration, or until the Maine legislature expressly addresses the issue, parties that operate in Maine (or that are subject to contracts that will be interpreted under Maine law) must carefully consider the impact of agreeing to a “no lien clause”.

From a contractor’s perspective, the most conservative approach, for now, is to assume that under Maine law a “no lien clause” will be enforced.

Perkins Thompson regularly advises owners, contractors, subcontractors and material suppliers with mechanic’s lien issues and construction contract issues. If you would like to speak with the firm about these issues, you can send an email to Joe Talbot or call him directly at 207-774-2635.