I recently heard an unfortunate story from a Maryland agriculture operator about a subcontractor mechanic’s lien attaching to her farm, and I realized that the mechanic’s lien process is one that every farmer should thoroughly understand.
Maryland’s Mechanic’s Lien Law
Every non-residential building built, repaired, or improved to the extent of 15% of its value is subject to the establishment of a lien from the contractor, subcontractor, surveyors, and suppliers for the payment of all debts associated with the project. The lien can also include the property covered by the building and extend to other land adjacent to the building. The definition of building is very broad and can include structures such as fencing and solar arrays.
To claim a mechanic’s lien, a contractor must file a petition in the Circuit Court in the county in which the property is located within 180 days after the work has been finished or materials furnished. The court will then review the request and if the request is found worthy, the judge will issue a show cause order to be served on the owner of the building, giving the owner 15 days to respond and object or the lien will be final.
It is important to note that normally the person subject to a mechanic’s lien is the actual owner of the real property. However, if a contractor executes a contract with a tenant for life or a tenant for a period of years, the tenant will be the proper party even though they do not own the underlying real property.
A subcontractor seeking a claim of lien must provide written notice of intent to claim a lien within 120 days after doing the work or furnishing the materials before proceeding in the Circuit Court.
Once established, the right to enforce any lien under Maryland law expires at the end of one year from the day the petition to establish the lien was first filed.
What Happens If the General Contractor Doesn’t Pay the Subcontractor?
Maryland’s mechanic’s lien law has been criticized for its overly zealous protection of workers vs. owners of land. This protection is evident in the common example of a landowner who after fully paying the general contractor for a building project becomes subject to a mechanic’s lien filed by a subcontractor and/or supplier who was never paid by the general contractor. Unfortunately, the law allows this to happen and puts the obligation on the landowner to ensure that general contractors properly pay their subcontractors and/or suppliers. In practice, this is a very difficult thing to monitor and can easily slip through the cracks during a typical construction project.
How to Avoid Being Stuck With a Mechanic’s Lien from a Subcontractor?
To avoid being subject to a mechanic’s lien from a subcontractor and/or supplier, it is highly advisable for the owner of a building project at the time of settlement or final payment in full to require signed releases from each material supplier and subcontractor who has provided work or materials under the contract indicating they have been paid in full. This requirement is actually in state law (Md. Code, Real Property Article, Section 9-114(a)), and if this practice is followed an owner should not be subject to a lien or otherwise liable for any work or materials included in the release.