For this week’s Guest Post Friday at Construction Law Musings I welcome Matthew Evans. Matt is the owner of Law Offices of Matthew S. Evans, III, LLC located in Annapolis, Maryland. He has practiced construction, real estate and land use law in Maryland and D.C. for thirteen years. Prior to opening his own firm in May 2011, Mr. Evans was a partner at a mid-sized firm in Anne Arundel County, Maryland. Mr. Evans lives in Historic Annapolis (only three short blocks from his office) with his wife Margaret, and three children, Matthew (5), Bo (4) and Peyton (2).
Some of the most common calls I get are from irate contractor or subcontractor clients who have not been paid demanding that I “lien the property”. Many times after calming the client down, I determine, to their dismay, that they are not entitled to a mechanic’s lien. In Maryland, the mechanic’s lien law is driven by statute, which contains specific requirements which must be met before the client is entitled to a lien.
The first question is whether the contractor or subcontractor is entitled to a lien for the work performed. Under Maryland law, “every building erected and every building repaired, rebuilt, or improved to the extent of 15 percent of its value is subject to establishment of a lien…for the payment of all debts.” It’s easy when dealing with new construction. No matter how small your portion of the work, the property is subject to the establishment of a lien. It is more difficult to determine entitlement when there is either a total or partial renovation or other work. The question becomes how do you determine the value of the building, and whether it has been improved “to the extent of 15 percent of its value.” Believe me, I have seen creative and some not so creative methods of calculation used by counsel to prove that certain work does or does not meet the requirment.
The second determination that needs to be made is who is the “owner” of the property. It is imperative to determine the correct owner or your lien claim may fail. Sometimes the name of the “owner” in the contract documents is not the legal title owner of the property. Typically this is easily ascertained through a title search. However, even a title search can be deceiving.
In a case I tried many years ago, I represented a subcontractor who had performed about a million dollars’ worth of work on a new commercial distribution facility. After there was a dispute over payment, I filed the requisite papers against the owner of the real property to establish a lien against the property. The defense answered that I had no right to claim a lien because I had not proceeded against the proper owner. As it turned out, the general contractor had contracted to build the facility for a tenant of the property who had executed a 99 year lease with the title owner of the property. Turns out, in that instance, the “owner” is the tenant and my client was only entitled to a lien to the extent of the tenant’s interest. The owner is not always the owner.
Another question is whether or not your lien opportunity is barred by time. In Maryland, a subcontractor (any contractor or material supplier who has not contracted directly with the owner) must serve a “Notice of Intention to Claim a Lien” on the owner of the property “within 120 days after doing work or furnishing materials”. Whether a contractor or subcontractor, the petition for mechanic’s lien must be filed “within 180 days after the work has been finished or the materials furnished”. One would be surprised at the number of issues that arise over when the last date of work occurred. Does doing work or finishing work include going back 2 months later to fix a minor “punch list” item? Calculating the real last date of work can be complex and is extremely important.
Finally, the required contents of the both the Notice of Intention to Claim a Lien and the Petition for Mechanic’s Lien are set forth specifically in the Maryland Code. If certain information is omitted, a lien claim will fail. The Maryland Code also requires that “copies of material papers or parts thereof, if any, which constitute the basis of the lien claim” be attached to the Petition when filed. I have made many arguments in court on both sides regarding whether the attachments are sufficient to comply with the law.
This article only touches the tip of the iceberg so to speak on potential pitfalls in the mechanic’s lien process in Maryland. The mechanic’s lien in Maryland can be an effective tool to collect outstanding debts for your construction clients. However, contractors must hire competent construction counsel who have experience in obtaining mechanic’s liens. Some of the most experienced and knowledgeable attorneys I know (in other areas of the law) contact me with questions about the mechanic’s lien process. My advice to them is refer it to experienced construction counsel. There are simply too many mistakes that can be made. The bottom line is don’t try this at home.