Build For The Tenant, But Lien The Landlord's Title? Massachusetts Supreme Judicial Court Clarifies The Standard

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The Massachusetts Supreme Judicial Court (the "SJC") released a decision on April 13, 2011 — in Trace Construction v. Dana Barros Sports Complex1 — that clarifies a contractor's lien rights against a landlord when the contractor performed work for the tenant. The decision is likely to have significant ramifications for contractors doing tenant work. As in many cases, this one arose when one company folded — the tenant here.

The Dana Barros2 Sports Complex LLC signed a lease with Oxford Road Realty Trust for indoor commercial space, to turn the space into a basketball camp facility. Barros advised Oxford that he intended to renovate the premises, and the lease provided that all renovations would become the property of Oxford at the end of the lease period. Barros was required to obtain Oxford's consent for any alteration of the building. Barros signed contracts with Trace Construction ("Trace") and CB Seating. Trace had several subcontractors.

Barros got behind in payments to the contractors; the work stopped; and one year later, he signed a "surrender of possession" document and returned the space to Oxford.

Massachusetts has long recognized the right of a contractor to pursue a lien against a leasehold interest in real estate.3 Contractors working for tenants often seek to cast a broader lien net in the hopes of gaining additional security and leverage. Landlords are typically cautious of liens being placed on the building title when work is being performed for a tenant occupying only a portion of the premises. Against this backdrop, the SJC decision clarifies the circumstances in which a broader lien claim can prevail.

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