by John R. Jameson

Idaho mechanics’ lien statutes reflect the public policy favoring protection of construction contractors, materialmen, and providers of certain professional services to receive renumeration for improvements made to real property. In essence, a right to a mechanics’ lien evens the playing field between property owners and persons improving the real property. Without the mechanics’ lien statutorily created security interests, builders, materialmen, and other contractors would only have judicial remedies of a breach of contract, or other operable cause of action, to obtain an enforceable right to collect monies owed. In the meantime, property owners would be able to profit from the property improvements without any consideration to the contractor performing the property improvements. The mechanics’ lien statutes change this dynamic by providing an immediate lien to secure payment for the work and services performed.

Application of Idaho’s mechanics’ liens statutes requires a thorough analysis of the law and the facts giving rise to a mechanics’ lien. Attorneys should be aware of several factors when dealing with mechanics’ liens. The actual work performed and the location thereof is important information when considering the property, or interest therein, subject to a potential mechanics’ lien. Furthermore, determining the priority of a mechanics’ lien is a dilemma that should be resolved to protect clients’ lien rights. Failure to address the issues of ownership of the property and the priority of a mechanics’ lien may result in substantial negative impacts on the interests of many of the parties involved in real estate transactions.  This article will identify some of the considerations that attorneys should discuss with their clients, as well as offer practical steps that can be taken to perfect and protect the priority of a mechanic’s lien.

A Mechanics’ Lien is an Inchoate Lien

Mechanics’ liens “are preferred to any lien, mortgage, or other encumbrance, which may have attached subsequent to the time when the building, improvement or structure was commenced, work done, equipment, materials or fixtures were rented or leased, or materials or professional services were commenced to be furnished […].”[1]

Mechanics’ liens have priority over any lien, mortgage, or other encumbrance that attached subsequent to, or was unrecorded, or of which the lienholder had no notice as of (as applicable) the commencement of physical work; the date that materials were delivered, leased, or rented; or the date that “materials or professional services were commenced to be furnished.”[ii] The Idaho Supreme Court has consistently construed this statute to mean that each contractor, subcontractor or supplier has independent priority based upon when their specific work, services, or materials were supplied to the property or project.[iii] 

For most persons with lien rights under this statute, the lienholder’s priority will relate back to the date that the contractor, subcontractor, or materialman physically commenced work or supplied materials to the property.[iv] A lien may encompass the entirety of the work performed under a single contract.[v] Therefore, pauses in work, waivers of lien claims, or even acceptance of partial payments for work performed may not affect the priority date for that lien claimant for work performed under a single contract. If work is performed or services are rendered under separate contracts, whether by the same or unrelated contractors, subcontractors or materialmen, the priority date for each contract and work conducted thereunder is determined independently of one another. [vi] The priority date for a resulting mechanics’ lien will be set by the commencement of work by each individual contractor, subcontractor, or materialman and not the execution of each provider’s contract for work to be performed.

Furthermore, the Idaho Supreme Court recently held that the priority of an engineer’s lien under I.C. § 45-501 relates back to the date “when the engineer commenced to furnish ‘any authorized, professional services’ under the contract regardless of where the services were rendered” and not to the date that physical work was commenced on the property at issue.[vii] By extension, this would also include work performed by a licensed surveyor in relation to the property.[viii] Therefore, certain mechanics’ lien rights may have priority over subsequent encumbrances, even if there has been no physical work commenced on the property. Thus an inchoate lien may have priority regardless of whether an actual claim of lien has been recorded in the county real property records.

Perfection of Lien

A person claiming a mechanics’ lien must file a claim of lien with the county recorder within ninety days after that claimant’s substantial completion of the labor or services or furnishing of materials.[ix] The Idaho Supreme Court has interpreted “completion” in this statute to mean “substantial completion” of the claimant’s work, and “trivial work done or materials furnished after the contract has been substantially completed will not extend the time in which a lien can be filed.”[x] Failure to properly record a claim of lien within this window may result in a total loss of lien rights against the property, though the claimant likely retains a personal action for collection of the debt.

The claim of lien is effective for six months after the claim of lien is filed, unless court proceedings are commenced to enforce the lien within that six-month period.[xi] If payment is made on the account or the lienholder extends credit with a set expiration date, the lien may be extended for an additional six months after the date of such payment or expiration of extension of credit so long as the payment or extension of credit is endorsed on the recorded claim of lien.[xii] The lien of a final judgment from a lien foreclosure action will be enforceable for ten years from the date of the judgment.[xiii] 

Property Rights Subject to a Mechanics’ Lien

Idaho Code § 45-501 outlines a party’s right to lien real property for which labor, materials and/or services have been performed. The code section states in part, “[The contractor] has a lien upon the same for the work or labor done or professional services or materials furnished, whether done or furnished at the instance of the owner of the building or other improvement or his agent.”[xiv] Idaho Code § 45-505 defines the real property, including the “ownership” of the property less than fee simple, that is potentially subject to mechanics’ liens within the State of Idaho. The property interest subject to the lien only extends to the interest the person requesting the services, work, or materials has in the land.[xv] For example, if the person requesting such services, work, or materials only holds a leasehold interest, the lien will only attach to the leasehold interest.[xvi]  

There are instances where a less-than-fee interest holder could potentially be considered an agent of the owner and bind the fee interest to mechanics’ liens. In such instances, the property owner must in some manner indicate that the agent is to act for him, and the agent must act or agree to act on his behalf and subject to his control.[xvii] However, merely acting in concert with one another, without a right of control, does not give rise to an agency relationship.[xviii] In most matters concerning the creation of an agency relationship, whether such relationship exists is a question of fact to be judicially determined.[xix]

The claimant has the right to lien all the “land upon which or in connection with which” the services were rendered, or the building, improvement, or structure is constructed, plus a “convenient space about the same” if the person that caused the services to be rendered or work to be performed also owns the adjacent land.[xx] “What area of land is subject to the lien in a given case largely depends upon the character of the improvement.”[xxi] “The question is not so much as to the amount of land required for the area to be occupied by the [improvement], but rather as to the amount of land to be improved and benefitted by the creation and use of the [improvement].”[xxii] “[T]he amount of land necessary for the convenient use and occupation of the property to be sold under the terms and conditions of the lien and judgment” must be determined by the court decreeing foreclosure.[xxiii] 

Tenancy in Relation to Mechanics’ Liens

Real property rights in Idaho consist of the proverbial “bundle of sticks” taught during the first year of law school. One of the lesser explored or considered “sticks” is the property rights belonging to a tenant or lessee of real property. As a general rule, lessees hold a property interest less than that of property owner’s fee interest. This leasehold interest, as it is commonly referred, is limited in scope and duration. It also generally prohibits lessees from transferring or affecting the freehold estate possessed by the property’s vested owner.

One area where this general rule does not automatically apply is when tenant causes certain improvements to be made to the real property. The common law rule is that contractors “cannot recover for improvements made to a landlord’s property absent an agreement to reimburse ….”[xxiv] However, when the improvements and/or repairs are made “beyond what mere tenants typically make to a real property,” such as electrical improvements and tree removal, a fee owner cannot generally avail themselves of such improvements without some type of restitution to the tenant upon the termination of the tenancy.[xxv] Such an instance begs the question of whether a contractor, material supplier, and/or a professional service provider can encumber a landlord’s interest in the property should a tenant fail to pay for the improvements.