Fleshing Out the Meaning of “Owner” Under Tennessee Construction Lien Law
By The 2007 modifications to Tennessee’s mechanic’s and materialmen’s lien law, codified at Title 66, Section 11 of the Tennessee Code, were designed to make it easier for lien claimants to obtain and enforce construction liens. The changes have largely accomplished the legislature’s purpose of clarifying and simplifying the process for lien holders. However, the statutory scheme remains complex, and courts continue to flesh out its true structure. Recently, the court shed light on the meaning of “owner” under the statute for purposes of distinguishing a prime contractor from a remote contractor.
In Bolon Custom Kitchens v. Parman, 2010 WL 761289 (Tenn. Ct. App. 2010), after entering a purchase agreement to sell a home to two Homebuyers, but before closing the sale, a Homebuilder contracted with a Kitchen Company to improve the home. The Kitchen Company, who was never paid, sought to enforce a construction lien against the property. By that point, though, the Homebuilder had already conveyed the deed to the Homebuyers. The case hinged upon whether the Kitchen Company was a “prime contractor” under the statute, which requires contractual privity between the contractor and the property owner. The Homebuyers argued that they acquired equitable ownership in the property as soon as they executed the purchase agreement. Thus, they maintained, the Kitchen Company was not a prime contractor because the Homebuilder was not the owner when it entered the contract with the Kitchen Company.
The Court agreed that the Homebuyers obtained an equitable interest in the property upon signing the purchase agreement. However, according to the Court, the Homebuilder retained legal title to the property until the deed was conveyed, so the Homebuilder was also an “owner” at the time it contracted with the Kitchen Company. Thus, the Kitchen Company was a prime contractor under the statute.
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