Mechanic’s Liens - The 15% Issue

A mechanic’s lien secures payment for labor or materials supplied by a subcontractor or general contractor in the improvement of real property, but not all buildings are subject to a mechanic’s lien. Unless the building is newly constructed, work done on a building to repair, rebuild, or improve an existing building must increase its value by 15%. If the work performed does not increase the value of the property by 15%, then Maryland will not permit the establishment of a mechanic’s lien.

Bowie & Jensen represented a heating, ventilation and air conditioning subcontractor performing work on a television studio in Baltimore City. The HVAC subcontractor filed a mechanic’s lien after the owner failed to pay any of the subcontractors. The owner took the position that the work performed did not increase the value of the building by 15% and therefore, a mechanic’s lien was not an appropriate remedy. In preparation, we enlisted an expert to valuate the building, who had to determine the value of the building and the amount of work performed on the building by all of the subcontractors.

Calculating whether the building has been repaired, rebuilt or improved by 15% is based solely on the value of the work performed and not the amount listed in the negotiated contract price. The 15% threshold applies to the increase in value of the entire building, even if the work performed is an addition to an existing building or work to repair a specific section of the building. However, the Maryland’s definition of a “building” for the purposes of establishing a mechanic’s lien has been drafted broadly and includes the drilling and installation of wells to supply water; the construction or installation of any swimming pool or fencing; the sodding, seeding or planting in or about the premises of any shrubs, trees, plants, flowers or nursery products; the grading, filing, landscaping, and paving of the premises; and the leasing of equipment, with or without an operator, for use for or about the building. If the work falls under any of these terms, the value of the work performed must be at least 15% of the total property.