A rapidly-expanding segment of the construction industry is centered on "green" building projects, including the construction of green-energy installations such as solar arrays or wind farms.

While this segment of the industry is experiencing rapid growth, mechanics lien and bond claim law has not necessarily kept pace. The policy behind mechanics lien protection has not changed, but the availability of the mechanics lien remedy may be slipping away for some of these types of projects. This article will briefly examine the reasons for this.

One particularly complex area in which green energy and mechanics liens converge is in the construction of solar arrays, or the installation of solar panels.

In the past, if a building wanted an energy system, it would simply buy and install the chosen system. Today, however, solar panels and complete solar systems — often with the ability to dump excess generated power back onto the grid — are being installed at least partially at the installer's expense. The ownership of the panels or systems stays with the installer/operator, and the panels or systems are leased back to the building owner in a complicated energy-purchase program/equipment-lease agreement.

At the end of the lease term, the equipment installed on the structure, which may be nearing the end of its useful life, is usually purchased by the building owner for a nominal, or significantly-reduced sum. Alternatively, the installation may be left where it is just because the cost of removing it is greatly outweighed by the convenience of just leaving it sit.

This type of agreement, and the not-necessarily-permanent nature of this particular project type can create problems for some mechanics lien claimants, even when it would seem like a no-brainer that a potential lien claimant should be able to recover for the work performed.

In determining whether a potential lien claimant has the right to file a valid mechanics lien, there are key questions that must first be answered, including whether labor or materials were furnished to improve real property; whether that labor and/or those materials were incorporated into or attached to the structure (or an original structure itself was built); and finally, whether the potential lien claimant remains unpaid.

There are additional requirements, as well, regarding timing and whether preliminary notice was sent (if required). But those questions, while equally important to the claim, are secondary to whether the lien claimant is of the class of parties entitled to lien protection.

In the installation of a system like a solar-energy system that specifically contemplates its future removal, extra layers are added to the determination of potential lien rights. Many states require the improvements giving rise to the lien to be "permanently attached" to the property at issue. If the solar panels may by removed, and the agreement specifically contemplates their removal, can their installation constitute a permanent improvement?

In a New York case from last year, the answer to that question was a resounding "no." In that case, the decision directly hinged on the New York statutory language that required only "permanent" improvements to give rise to a valid mechanics lien claim.

In other states, the result could be different. In fact, it would be surprising if the same result was reached in Louisiana, which allows a mechanics lien to attach pursuant to a "modification" to or "other physical change of an immovable or its component parts."

These determinations are not the end of the line in assessing the potential protection for solar-energy projects, however. Even before determining whether a party would have the ability to file a valid mechanics lien, it must be determined whether a mechanics lien is even the correct instrument through which the claimant may be protected.

These days, many municipalities are installing large solar arrays, or having solar panels installed on public buildings to help defray rising energy costs. In this situation, the project type must be determined before the claimant knows whether a mechanics lien or a bond claim is the appropriate remedy for nonpayment.

Making a claim pursuant to a public project is not devoid of stumbling blocks either, however. While the exact same questions may not apply, at least regarding the permanence of the improvement, other problems may arise.

For now, it appears that parties who are unpaid on green-energy projects — especially the installation of solar energy systems — may face difficulties not generally faced by unpaid claimants. It remains to be seen how mechanics lien and bond claim will adapt to these newly blossoming projects, or if it will adapt at all.