ConstructionPro Week, Volume: Construction Advisor Today - Issue: 59 - 06/10/2010

Tension Between Arbitration and Mechanic's Lien Rights

There has always been a tension between the right to arbitrate disputes and the right to place a mechanic’s lien on the project owner’s property. Arbitration is a creature of contract. The parties to a construction contract have mutually agreed to resolve their disputes through binding arbitration. As with any contractual right, however, the right to arbitrate can be waived through conduct inconsistent with the assertion of that right.

 

Mechanic’s lien rights are created by statute. The remedy is inherently judicial. A mechanic’s lien can be foreclosed only through a suit in a court of law. This creates a conflict with arbitration. The argument can be made that the filing of a mechanic’s lien is inconsistent with, and a waiver of, the right to resolve disputes through arbitration.

 

A Florida court recently grappled with this issue. The court concluded that a contractor could simultaneously perfect and maintain its mechanic’s lien rights while arbitrating its payment claim. The underlying dispute, the amount owed the contractor, was to be resolved through arbitration. The mechanic’s lien served to secure payment of any eventual arbitration award.

 

This Florida ruling reflects what has emerged as the prevailing approach nationwide. The Advisor invites your comments on best practices when it comes to the interplay between arbitration and mechanic’s liens. Should contractors be allowed to simultaneously pursue these two remedies? How is arbitration conducted if the contractor is concurrently perfecting and asserting its lien rights?

 

Featured in next week's Construction Claims Advisor:

  • Convenience Termination Can’t Be Used to Get Better Deal
  • Wyoming Supreme Court Distinguishes Materialman from Contractor
  • Contract Modifications Had Differing Waiver Effects

 

Bruce Jervis, Editor
Construction Claims Advisor

 

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