Trump Post Office Mechanic's Liens

It's not often that one finds mechanic's liens in the news.  I think this is ripe for inclusion in secured credit casebooks.

Update:  After thinking about this more, this gets more interesting than a plain vanilla mechanic's lien.  Recall that Trump doesn't own the Old Post Office.  He has a leasehold, and the building is owned by the federal government.  So this raises the question about whether the lien reaches to the fee simple ownership of the federal government or if it is a lien on the leasehold.  I have no idea. There are some states in which a mechanic's lien triggered by work done by a tenant reaches the landlord's fee simple ownership if the work was done with the landlord's consent (see here, e.g.). I don't know what, if anything, DC caselaw says on this.  (If the lien is filed against the federal government itself, there's a different process through the Miller Act, but I doubt that applies since the federal government was probably not a party to the construction contract.) 

A potential further complication is the status of federal property in DC. Can it be subject to mechanic's liens?  Can it be foreclosed on?  Where does sovereign immunity come into play?  

Finally, what is the effect of a lien on the property on Trump's leasehold?  I can't imagine that there's any way to actually foreclose on Trump's leasehold--the lease for the Old Post Office isn't going to be freely transferable.  If so, what good does a mechanic's lien do, other than embarrass Trump?  Is it an Event of Default under the lease if Trump suffers it to persist?  If so, that would give the contractors some leverage, but this all seems much messier than a typical mechanic's lien situation. 

I'm somewhat perplexed.  Trump doesn't own the Old Post Office.  He has a leasehold.  So is the mechanic's lien filed against his leasehold or against the building?  I don't see what good it does to file it against a.  A mechanics lien gets paid in one of two ways.  Either it gets paid when the building is sold or it gets paid after foreclosure by the unpaid contractor following a successful suit for the unpaid balance.  Given that the building is federally owned, I'm not sure what either of this means.  

Comments

[Bob Lawless]

Interesting, indeed, Adam. The issue of whether the mechanic's lien attaches to the underlying property is a long-running dispute. Most jurisdictions, including D.C., hold it does not. In D.C., a mechanic's lien could attach if the work was authorized by the owner's agent, but there are some old D.C. cases expressly holding that a being a lessee by itself does not make the lessee an agent of the landlord for purposes of the D.C. mechanic's lien law.

Then, there is the question of whether the lien can attach to a lease of public property, as you point out. I suspect the real value of the lien is the problems it can cause for other contractual relationships (e.g, the WaPo article says the lease requires any mechanic's lien to be discharged within 30 days). Until it is cleared, it will be a charge against the leasehold interest.

To file the mechanic's lien, the contractors had to submit a sworn, notarized statement submitted under penalties of perjury that they have a right to recover the amounts claimed. D.C. Code § 40-301.02. This is a little bit more rigorous evidence than we have had, not that the many reports of Trump stiffing the people with whom he does business left little doubt it happens.

[SYSM]

The federal government may have to buy-out Trump's interest in the lease, if it turns out there is a domestic emoulment problem. If so, presumably they would have to satisfy the liens as well?

[SYSM]

Also, from the point of view of a construction attorney, they filed the lien because It's What You Do. There's next to no cost, no downside, and various potential upsides, both legal and extralegal.