Court Upholds Lien Filed Based on a Letter of Intent, When No Construction Contract Was Executed
Golden Pond Resident Care Corp. requested a bid from Congress Building Corp. to build a portion of an assisted living facility in Massachusetts. After completion of bidding, Golden Pond entered into a Letter of Intent (LOI) reflecting Golden Pond’s award of the work to Congress for a maximum price of $7,725,000. The LOI also authorized Congress to begin purchasing construction materials and services while the parties worked out the construction contract terms within 10 days. No construction contract was executed within 10 days of the signing of the LOI, so Golden Pond informed Congress the LOI expired and Golden Pond no longer wanted to award the construction work to Congress. Congress filed a mechanic’s lien for $359.070.11 against the Golden Pond property to recover costs it incurred in reliance on the LOI award.
Congress alleged the LOI constituted a contract within the meaning of Massachusetts’ mechanic’s lien statute, thereby giving Congress the right to file the lien. The lower court disagreed and granted Golden Pond’s motion to remove the lien. The Massachusetts’ appeals court disagreed, however, reversing the lower court’s removal of the lien. The appeals court found there existed unanswered questions of fact regarding whether the parties intend the LOI to be a contract and be bound by the terms of the LOI. While the appeals court did not decide whether the lien was valid, it did establish that, under the correct circumstances, an LOI can be a contract within the meaning of Massachusetts’ mechanic’s lien law.
New York Construction Company Files $7.7 Million Lien in Denver, Colorado
Hotel development company, Stonebridge Cos., contracted with Turner Construction Co. of New York to build a hotel in the upscale residential district of Cherry Creek in Denver, Colorado. The hotel was completed in October 2018, nearly one year behind schedule. Turner alleged the construction delays were caused by Stonebridge and filed a $7.7 million mechanic’s lien against the hotel property for the costs Turner incurred because of the Stonebridge caused construction delays. Stonebridge responded by filing a lawsuit against alleging Turner caused the construction delays and that the mechanic’s lien was void because it was “excessive”.
Stonebridge alleges it paid Turner the guaranteed maximum price of $55.4 million for the construction. Stonebridge further alleges Turner caused the construction delays and, therefore, owes Stonebridge $2.3 million in delay liquidated damages pursuant to the contract. Stonebridge also claims Turner miscalculated the value of the lien it filed by over $1 million based on Turner’s own records. Stonebridge requests the court to void the entire Turner lien because it exceeds any actual amount that could be owed to Turner to a degree that the lien must be dismissed. While the argument that the mechanic’s lien exceeds any amount owed to Turner appears to be contradict Stonebridge’s argument Turner was paid in full and owes liquidated damages, it is not uncommon for lawsuits to allege contrary claims just in case the other claims fail.