In determining whether material or equipment (“Work”) installed upon the Property is a permanent improvement, the Court considers three (3) factors:
1) the nature of the attachment to the Property;
2) the adaption and necessity of the Work to the Property; and
3) whether the Parties intended on the Work to become part of the Property.
While all of the factors are all considered together, the 3rd factor, intent of the Parties, weighs the heaviest as the most important factor.
The first factor relates to how securely or permanent the Work is installed at the Property. However, this fact alone, whether the Work can be removed without injuring the surrounding Property does not prevent the Work from being lienable.
The second factor relates to whether the Work can be used at other properties and is the Work necessary for the Property’s operation and purpose.
Finally, in considering the 3rd factor, intent, the Court would review the agreements between all the Parties in the transaction for the Work and for the use of the Property. In that regard, the Court will consider the following:
i) whether the Party performing the construction had notice of the agreements related to the use of the improvement;
ii) were any agreements recorded with the County Recorder’s Office;
iii) who paid for the Work;
iv) who gets the benefit of the Work; and
v) who is actually the legal owner of the Work.
For example, if any Party besides the Property’s owner, is allowed to remove the Work, then the Work is probably not lienable.
To prevent this situation, a Contractor should ask to see the agreements between the Owner and General Contractor or Developer. Also, structure the payment as if the Contractor did not have lien rights.
Finally, please contact this Firm to review and negotiate the contract with the other Party in order to provide security for payment on behalf of the Contractor or a release of liability on behalf of the Owner, the uncontested right to remove the Work if payment is not received, or be able to enforce the Contractor’s lien rights.