{"id":897114,"date":"2020-02-26T10:38:27","date_gmt":"2020-02-26T17:38:27","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897114"},"modified":"2020-02-26T10:40:41","modified_gmt":"2020-02-26T17:40:41","slug":"arbitration-construction-disputes-involving-mechanics-liens","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/arbitration-construction-disputes-involving-mechanics-liens\/","title":{"rendered":"Ensuring Efficient Arbitration of Construction Disputes Involving Mechanic\u2019s Liens"},"content":{"rendered":"\n

Robert G. Campbell and Trevor B. Potter | Construction Executive<\/a><\/p>\n\n\n\n

There may be tension between the enforcement of statutory mechanic\u2019s lien claims when a contractual dispute resolution provision calls for arbitration. Once the parties are in arbitration, it may not be clear whether the arbitrator has authority to make factual determinations regarding amount and validity of mechanic\u2019s liens, and whether courts are bound by these determinations. This uncertainty stems from the fact that in most states a mechanic\u2019s lien can only be enforced by a court of competent jurisdiction. Indeed, many mechanic\u2019s liens statutes define foreclosure as a \u201cjudicial process,\u201d and courts generally have exclusive jurisdiction to issue orders foreclosing on real property1<\/sup>.  <\/p>\n\n\n\n

The risk for contractors and owners is that they will spend time and money re-litigating factual issues related to proving elements of a mechanic\u2019s lien claim, including the proper lien amount, timeliness and other prerequisites. Without a clear understanding of what issues and elements are arbitrable, the parties run the risk that an arbitrator will rule on certain elements only to find out during post-arbitration lien foreclosure proceedings that the arbitrator lacked authority to make determinations on those elements. Questions therefore arise whether a court will enforce the arbitrator\u2019s determinations and whether the parties must relitigate mechanic\u2019s lien issues creating a further risk of inconsistent rulings. <\/p>\n\n\n\n

These risks can be minimized through arbitration provisions which address these issues, express requests in arbitration demands and by ensuring that arbitration awards contain explicit determinations of mechanic\u2019s liens issues.<\/p>\n\n\n\n

The resolution of any mechanic\u2019s lien claim requires factual determinations regarding the amount and validity of a lien. The appropriate amount of a mechanic\u2019s lien is generally the same as the contract balance owed2<\/sup>.  Since construction disputes usually involve breach of contract claims for unpaid amounts, arbitrators will necessarily determine the contract balance owed to a lien claimant during arbitration. It is therefore efficient for arbitrators to determine the appropriate amount of mechanic\u2019s lien claims. <\/p>\n\n\n\n

Lien \u201cvalidity\u201d refers to whether a lien claimant strictly complied with state law requirements to perfect its mechanic\u2019s lien. Some of those prerequisites include:<\/p>\n\n\n\n