Maryland Expands Scope of Mechanic's Lien

This year, the Maryland legislature passed a new law that expands the definition of work or materials furnished “for or about the building” to include interior design services provided by a certified interior designer. This new legislation takes effect on October 1, 2008. This expands the scope of Maryland Mechanic’s Lien, because Maryland courts have previously held that work done or materials furnished that are not specifically listed in the Maryland Mechanic’s Lien statute cannot be the subject of a mechanic’s lien.

For example, in Maryland, the court held in 1962 that a swimming pool is not a lienable item because the Mechanics’ Lien law restricts lienable items to buildings or other stated items. However, in 1966, the Maryland legislature changed the law to specifically include swimming pools, which are now considered lienable items for the purposes of mechanics' liens.

If you have any questions regarding mechanic's lien or construction law, contact Michael W. Siri at 410-583-2400 or via email at siri@bowie-jensen.com.

Application of Mechanic's Liens: Removable Machines

Maryland's highest court recently held that Maryland's Mechanic's lien laws apply to immobile but ultimately removable machines. In this case, the Court held that the contractor who constructed a dredge for a sand and gravel pit could lien the dredge. The Court drew a distinction between machines that were ultimately movable in use versus those that are merely removable. The court concluded that those machines that are movable in use are not subject to mechanic's liens whereas those that are merely removable are lienable. In this case, the Court reasoned that the Dredge was no movable in use because it was located in a sand and gravel pit and hence subject to a lien. Finally, the Court noted that machines incorporated into a building are not lienable because at that point the building itself becomes lienable

For further questions regarding Mechanic's Liens, please contact Matt Hjortsberg at 410-583-2400 or at Hjortsberg@bowie-jensen.com

The Importance of Lien Releases

A question that comes up often is whether an Owner can be forced to pay twice for the same work. In the context of commercial construction, the answer is "yes," if the Owner does not get the appropriate lien releases. A Petition for a Mechanic's Lien allows a subcontractor to collect for unpaid labor, materials and equipment from the Owner when the subcontractor has not been paid by the general contractor. Consequently, if the Owner has paid the general contractor, but the general contractor has squandered the money or otherwise not paid the subcontractor, the subcontractor can collect from the Owner through a Mechanic's Lien. However, if the Owner obtains all of the requisite lien releases from the general contractor's subcontractors, sub-subcontractors and materialmen prior to payment, then the Owner can prevent the entry of a mechanic's lien.

For further questions contact Matt Hjortsberg at (410) 583-2400 or at hjortsberg@bowie-jensen.com

Mechanic's Lien Notice Language

In response to more questions regarding Mechanic's liens we have cut and pasted the standard notice of lien form lifted from the Maryland Annotated Code. Remember, this notice must be sent registered or certified mail, return receipt requested, to the Owner. It can also be personally delivered to the Owner. If notice cannot be accomplished by these means, it can be posted on the property.

Notice to Owner or Owner's Agent of Intention to Claim a Lien

........................................................(Subcontractor) did work or furnished material for or about the building generally designated or briefly described as .................................................The total amount earned under the subcontractor's undertaking to the date hereof is $ .................... of which $ .................... is due and unpaid as of the date hereof. The work done or materials provided under the subcontract were as follows: (insert brief description of the work done and materials furnished, the time when the work was done or the materials furnished, and the name of the person for whom the work was done or to whom the materials were furnished).

I do solemnly declare and affirm under the penalties of perjury that the contents of the foregoing notice are true to the best of the affiant's knowledge, information, and belief. ............................. (Individual) on behalf of ................................ (Subcontractor) (Insert if subcontractor is not an individual)"

Timing For Filing a Mechanics’ Lien

Timing is an important aspect when a contractor or sub-contractor wants to obtain a mechanics’ lien on a property to secure the owner’s unpaid obligation.

Based on a number of questions from readers regarding the time for filing a mechanics’ lien, we wanted to clarify the time frame in which a party must act to secure payment for labor or materials supplied by a contractor or general contractor in the improvement of real property.

Contractors must file a petition to enforce a mechanics’ lien within 180 days from the last day any work was performed on the project. Subcontractors, however, have an additional hurdle before filing a petition. A subcontractor must first provide written notice to the owner of the property by registered or certified mail, return receipt requested within 120 days from the last day of any work performed on the project. Notice also may be given by posting on the door of the property if the subcontractor is unable to serve the owner by mail. A subcontractor who fails to meet this requirement will be barred from obtaining a mechanics’ lien.

Contractors and subcontractors wishing to file a mechanics’ lien also must provide information regarding ownership of the property, the property itself, and the project. Specifically, a petition for a lien must contain the name and address of the owner of the property; a detailed description of work provided and materials furnished; a statement that the construction is either new construction or a statement that work increased the building’s value by at least 15%; the specific dates work was completed or the materials were furnished; the name of the person or company for whom work was performed or materials furnished; the total amount claimed; and a description of land and description of building. Further, the petition must include all relevant material papers and an affidavit from the petitioner that sets forth the facts upon which the petition for a lien is based. The failure to meet any of these requirements may cause the dismissal of the petition.

Any contractor or subcontractor considering a mechanics’ lien should start as early as possible on the extensive preparation required to meet the close filing deadlines. Otherwise, this important means of securing a claim for work performed will be lost as to that work.

For further information on this subject please contact Michael Siri at 410-583-2400.

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.