Maryland Mechanics Lien Rights Are Just Ducky

If It Walks Like a Duck & Talks Like a Duck, It Must Be a Maryland Mechanic’s Lien

Furnishing to a construction project in Maryland? Be cautious when securing your mechanic’s lien rights.

Ah Maryland, home of the Chesapeake Bay, which is home to hundreds of various birds, including duckies! Although its waterfowl are quite impressive, Maryland is a bit of an odd duck in the mechanic’s lien world. Being an odd duck isn’t a bad thing, but flying right to suit for your mechanic’s lien may seem a bit quackers. (Enough with the duck, I promise.)

In Maryland, Lien is Suit

Securing your right to a mechanic’s lien in Maryland is not merely the recording of a document. You actually have to petition the court for the approval to establish a mechanic’s lien. Here’s more information from The National Lien Digest:

Notice

Notice of Intention:

  • Serve notice of intention to claim lien upon the owner within 120 days after last furnishing materials or services.
  • When contracting directly with the owner, no notice is required.

In order to have lien rights on an improvement to an existing structure, the building must be repaired to the extent of 15% of its value (25% of its value if a tenant ordered the improvement).

Lien / Suit

  • File a Petition to Establish the Mechanic’s Lien within 180 days after last furnishing materials or services.
  • File a Petition to Enforce the Mechanic’s Lien within 1 year from the date the Petition to Establish the Mechanic’s Lien was filed.
  • It is recommended that the Petition to Establish and to Enforce the Mechanic’s Lien be filed at the same time.

This unique process for the approval of your petition to establish a lien may be accompanied by significant scrutiny of your claim.

In more traditional states, invalid liens can be filed quite easily (It’s illegal and you shouldn’t do it! But it happens.) because there isn’t a judge reviewing your lien and determining whether or not you can proceed with the recording. It’s typically not until the foreclosure stage that the validity of a lien is even questioned.

The Judge’s Scrutiny, Leaves Claimant without Lien Rights

The case, ARCO/Murray Nat’l Constr. Co., Inc. v. Equitable Development, LLC, Dist. Court, D. Maryland 2016, went before District Judge James K. Bredar, who dismissed the claimant’s request to establish a mechanic’s lien, because the claimant was still furnishing at the time of its request.

Equitable Development, LLC (ED) hired general contractor, ARCO/Murray Nat’l Constr. Co., Inc. (ARCO), to convert an old office building into luxury apartments and retail space. The original contract amount was $18,274,000 but with change orders, the contract amount rose to $21,095,833.

As of 1/29/16, ED had paid ARCO $19,931,333, leaving ARCO with a claim amount of $1,164,500. ARCO petitioned the court for the right to establish the mechanic’s lien. ED argued that ARCO wasn’t entitled to the lien, because ARCO didn’t comply with statute and filed their petition too early.

The court agreed.

“The pertinent language is that in § 9-105(a): “A person entitled to a lien shall file proceedings in the circuit court for the county where the land or any part of the land is located within 180 days after the work has been finished or the materials furnished.” As Equitable points out, ARCO/Murray expressly alleged that, at the time it filed its petition, it was continuing to work on the project. Thus, the work was not finished when ARCO/Murray sought to claim a lien.

The notion of a premature filing of their lien petition was reinforced, when ARCO included unapproved change notices in its claim amount.

The fact that ARCO/Murray included unapproved change orders to support its claim lends credence to the conclusion that ARCO/Murray’s petition was premature. If the work had been finished, then ARCO/Murray could have relied upon executed change orders to prove what it is due. Because the work was not finished, however, ARCO/Murray could not properly support its petition with executed change orders. At the time ARCO/Murray filed its petition, its work was continuing, as were the communications between the parties on work still to be done, and no final accounting had taken place.”

Takeaway

Always have documentation to support your claim (change notices, invoices, bills of lading, etc.). Strictly adhere to statute & seek legal guidance to ensure you are proceeding correctly.

Regardless of where your project is located, you should never file an invalid mechanic’s lien. You should always be prepared for your lien to be scrutinized, even if the scrutiny doesn’t happen until it’s time to foreclose the lien.

In this case, ARCO’s proverbial goose may be cooked, but it’s a recent opinion that has likely just embarked on its flight through the judicial system.

Most Recent Resources

Blog

Will Safe Harbor Ever Exist for Florida UCC Filings? Zero Tolerance

Safe Harbor couldn't save this UCC. Florida's 'zero tolerance' policy means you must strictly comply with Article 9-503(a). Learn more here!
Read More
white paper
White Paper

NCS Credit Lien Index 2022 Q3

The Lien Index increased 4 points in Q3 2022, an 11% climb over Q2 2022. As expected, Q3 mechanic's lien activity rose 11% over Q2, and activity remained lower than Q1, which peaked at 43. We anticipate the Index will increase 2%-5% in Q4. Download the full report for details.

Read More
live webinars
Live Webinar

The Basics of the UCC Process

Worried about customers filing bankruptcy? Concerned about extending credit to marginal accounts? UCC filings secure collateral in agreement with your customer’s promise to pay.
Read More