When a mechanic’s lien claimant sits down with their attorney to file a mechanic’s lien on real property, the attorney generally leads with the same, initial question: Was your contract directly with the owner or did you deal with a general contractor? The lien laws can take drastically different paths, based on the answer.
But, what if the contractor says: Neither, I dealt with the tenant.
In that case, it depends.
In the past, I’ve generally included a broad allegation that the tenant acted as the owner’s agent for the improvements, based on a few old common law cases.
In 2007, the legislature enacted Tenn. Code Ann. § 66-11-102(d), which restricted the lien claimant’s ability to assert a lien “unless the lessee is deemed to be the fee owner’s agent.”
This new statute requires a far more detailed showing from mechanic lien claimants. In determining whether the tenant acted as the owner’s agent, the statute states that “the court shall determine whether the owner has the right to control the conduct of the lessee with respect to the improvement…” Further, the Court “shall consider” the following four factors:
- Whether the lease requires the lessee to construct a specific improvement on the fee owner’s property;
- Whether the cost of the improvement actually is borne by the fee owner through corresponding offsets in the amount of rent the lessee pays;
- Whether the fee owner maintains control over the improvement; and
- Whether the improvement becomes the property of the fee owner at the end of the lease.
So, to be clear, it’s no longer of simply alleging that a tenant was the owner’s agent. Instead, there is now a clear(er) statutory framework that must be followed.
Simply having a landlord tenant relationship isn’t enough to impute agency for lien purposes. This statute appears to require that the tenant truly acted at the direction of the landlord.
While there haven’t been any Tennessee cases on this statute, legal commentaries have described this as setting a fairly high burden on parties claiming a lien. This may reflect the fairly conservative nature of the Tennessee legislature, but, given the specific text, I’m betting our courts will enforce it as written.