The Border War III: Mechanic’s Liens for Rental Equipment
From the Mo-Kan Construction Law Blog by Lee Brumitt
Liens for unpaid rent for machinery and equipment vary from state to state. Kansas has no special rules governing liens by those who rent equipment for others to use. Such renters are essentially treated as suppliers under Kansas law and are required to follow the lien law, K.S.A. 60-1101, generally applicable to all unpaid suppliers and contractors. The procedure is different in Missouri.
In 2005, the Missouri legislature rewrote its mechanic’s lien law, 429.010, R.S. Mo., to limit the ability of companies renting machinery or equipment for use by others to file liens. In order to file a valid lien for unpaid rent, the 2005 revision required the following elements to be met: (1) the property must be a commercial property; (2) the amount of the claim must exceed $5,000; and (3) notice must be given to the owner within 5 days of the commencement of the use of the machinery or equipment that such items are being used on its property. The notice must include the name of the entity renting the equipment, the equipment or machinery being rented, and the rental rate. If any of these prerequisites is not met, the lien is invalid.
The 2005 revision caused confusion among contractors which rented machinery or equipment for their use on projects and included the cost of the rental in their subsequent mechanic’s liens. In 2007, the statute was revised to state that the prerequisites noted above for filing a lien for rental equipment do not apply to those persons who rent machinery or equipment in performing their work or labor. This statute is popularly read as allowing those who rent machinery or equipment, i.e., lessees, to include the rental charges in their liens without having to give the notice of commencement to the owner or meeting the other prerequisites. However, the statute could also be interpreted by those seeking to invalidate liens as excluding lessees from claiming a lien for the cost of rental equipment. Unfortunately, there are no cases which have specifically addressed this conundrum. The only case to address the issue, Mo. Land Development Specialities, LLC v. Concord Excavating Co., noted the differences in interpretation and side-stepped ruling on the issue.
There has been additional confusion centering on the amount which can be liened for rental charges. Under the statute, the lien for rental of machinery or equipment is “for the reasonable value…during the period of actual use and any periods of nonuse taken into account in the rental contract…while the equipment is on the property…” In the Concord Excavating Co. case, the Missouri Court of Appeals held that while rental machinery or equipment is idle on the project, such “downtime” charges are simply not lienable regardless of what the rental contract says about charges for “downtime.” Therefore, under this case, rental machinery or equipment is not lienable just because it’s on the property; it has to be in use improving the property in question.
Copyright © 2019, Dysart Taylor.
All Rights Reserved.