Liens can sometimes become procedural nightmares for contractors and other parties entitled to the placement of this device. Contractors often encounter incredible costs and delays when not following the lien law protocol.
Maryland is one such state where a contractor could truly run into problems. The State of Maryland, differs vastly from its nearby Virginia and District of Columbia. Though VA and DC follow the nationwide rule of record first and file second, Maryland requires a file first and record second procedure.
We want to go through some of these mechanics so that you can become better acquainted with your obligations in the State of Maryland.
Why File a Lien in Maryland?
Similar with most states, Maryland’s lien action enables the claimant to obtain a right and action against uphill general contractors and property owners, when they do not ensure that lower level parties are paid for services or materials delivered at a job.
Even in situations where a subcontractor, or other low level party, enters into a contract with a contractor, which conditions payment upon payment to the contractor from the owner, a claimant who remains unpaid may utilize the lien law at any time to preserve its right to payment.
In Architectural Systems, Inc. v. Gilbane Building Co., a Maryland Court interpreted § 9-113(b) of the Maryland Real Property Code to state that liens are not barred by “payment if paid” or “payment when paid” clauses. Thus, a claimant is free to file as long as they meet other procedural guidelines.
Who Can Lien?
Like most other states, all persons providing labor and materials for buildings erected or for repairs and improvements to existing buildings have lien rights.
However, in the case of “repairs of improvements,” only if such improvements and repairs equal 25% of the value of the improved building does one acquire lien rights. Md. Real Prop. Code Ann. § 9-102(a).
Further, architects and union trustees have also been entitled to claims.
How Do I Protect My Lien Rights? Are There Notices?
Maryland is tough on notice. Under the seminal case, Tyson v. Masten Lumber & Supply, Inc., the Court expressly stated that improper notice will void a lien. Thus, care must be afforded when preparing to secure your lien.
(A) General Contractors
If you contract directly with the owner – you are not required to provide notice prior to filing your lien. This includes all general contractors under the statute, as well as those subcontractors or suppliers who have an agreement with the owner to provide services or materials.
A subcontractor, or other 2nd tier claimant, who does not directly contract with the owner, will lose its lien rights unless within 90 days after doing work or furnishing materials, the owner is given written notice of the intention to claim a lien.
Md. Real Prop. Code Ann. § 9-104 provides the form for this lien. The law explicitly states the mailing of the notice within 90 days, by registered or certified mail, will constitute effective notice.
(C) Exceptions to the Notice Rule?
There are some minor exceptions to the notice rules. Actual notice to an owner of a claimant’s intention to file has been successful, meaning that as long as a claimant can prove that the owner knew about the impending lien claim, it cannot defend on the basis of lack of written notice.
- Dive deeper: Maryland Preliminary Notice Guide & FAQs
How Do I File My Lien?
This is the tricky part. Unfortunately, Maryland has elected to make liening a property a substantial investment. This makes it more difficult for Levelset to assist you in filing your lien, but not impossible.
Lien actions MUST be initiated by way of a prior legal action. Yep, that’s right, you must file a lawsuit first in order to obtain an order from a court of competent jurisdiction that entitles you to file a lien.
A petition to claim lien must be filed in the court for the county where the work was completed within 180 days from the completion of work or last date of delivery of materials.
Work has been interpreted to mean the last date of work being provide by the claimant, which can extend past the date of substantial completion.
In order to file this action, you should consult with a Maryland attorney or contact the courts to inquire about a form.
At a minimum, the petition will require you to submit a verified account of all material facts and copies of all material papers, including contracts, orders, invoices and payment receipts. Also, the claimant must illustrate that the notice was properly served, if required by law.
The petition must be served upon the owner, who will be ordered to show cause why the lien should not be ordered within 15 days. An owner may answer and defend the petition, but otherwise, if it fails to answer, the petition shall be deemed admitted and the lien valid.
Once your action is filed and you obtain an order from the court, you may contact Levelset to to get your lien filed!
What Can I Recover in My Lien?
Unlike other states, a Maryland subcontractor can make a claim for the full extent of contractual amounts that are due under its contract with a contractor. Thus, the owner cannot defend that it has already paid the contractor for amounts due to the contractor, as long as notice was properly delivered.
The contract will determine what you can claim on your lien. Any additional charges over the costs of the original work may be claimed, as long as they are spelled out in the contract.
What Pitfalls Might I Encounter?
Maryland has bond laws which provide a manner in which the owner, or general contractor, can have the lien released before payment to a subcontractor. This will result in your lien claim becoming a lawsuit for recovery.
But, Maryland does not have a slander or improper lien law which would subject a claimant to liability. As long as the lien is not proven to have been made (1) falsely and (2) spitefully, the lien will simply be dismissed without further damage to the claimant.
Can I Waive My Lien Rights?
The short answer is NO!
Section § 9-113 of the Maryland Real Property Code was revised in 1981 to expressly prohibit lien waivers prior to beginning of the work at the property. Of course, during the work, and upon payment, contractors may obligate you to provide them with a lien waiver for work completed, but they cannot abridge your rights to claim a lien during the contracting stage.