A few months ago, I wrote a post about a popular mechanic’s lien myth: Myth: You Can’t File A Mechanic’s Lien Without A Written Contract. Despite the common misconception, mechanic lien claims can be filed virtually anywhere in the United States without a written contract. Mechanics lien claims can be made against the project based on oral contracts, implied contracts and other types of agreements that are never reduced to writing.
Of course, there are always exceptions. Usually, these exceptions exist when a specific state statute requires written contracts to protect consumers, such as is the case in Oregon on certain residential projects. In Oregon, there is a consumer protection law that requires written contracts whenever the contract amount is greater than $2,000. Fail to comply with that consumer protection law, and the party loses lien rights.
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An interesting (but unpublished) decision just came down from the Indiana Court of Appeals in Walsh v. Chris Sweeny Construction Inc. The decision reiterates the general rule across the nation that written contracts are not required to file a mechanics lien.
Indiana has a “Home Improvement Contract Act” (HICA) which is a consumer protection law requiring all contracts over $150 to be in writing. I.C. §§ 24-5-11-1, -3, -4, -10(a). However, even though violation of similiar consumer protection laws would prevent the offending party from filing a mechanics lien claim (i.e. in Oregon or Louisiana), this case in Indiana ruled opposite of this.
The Indiana Court of Appeals held as follows:
It would be unjust for Walsh to retain the benefit of Sweeny Construction’s services despite its non-complaince with HICA. Nor should Sweeny Construction’s non-compliance preclude foreclosure of its mechanic’s lien, as a mechanic’s lien is also an equitable remedy premised upon principles of unjust enrichment. We therefore disagree with Walsh that non-compliance with HICA precludes pursuit of the equitable remedies of unjust enrichment damages and a mechanic’s lien.
This makes one wonder just what effect – if any – the HICA would have against violating parties. Nevertheless, it provides another example that mechanic lien claims can be filed based on oral, implied and other contracts not in writing.