Mechanic’s Liens in Maryland, D.C. and Virginia
Many contractors assume that the laws of the State of Maryland, the Commonwealth of Virginia, and the District of Columbia are essentially the same with regards to establishing mechanic’s liens to secure payment of money owed on construction projects in the three jurisdictions. In reality, there are significant differences between these three laws and the related procedures. Therefore, it is important for contractors to have a working knowledge of the basic requirements of the three jurisdictions in order to protect their rights.
While traditionally liens are created by recording a notice of lien in the land records in the County where the project is located. That is no longer the case in Maryland. Prior to the 1976 case styled as Barry Properties, Inc. v. The Fick Brothers Roofing Company, 277 Md. 15 (1976), a contractor had a lien for labor and materials provided to a project, unless it failed to enforce those rights for more than 180 days after last providing labor or materials to the project. A subcontractor or material supplier had to provide notice of its intent to enforce within 90 days after last providing labor and materials to the project. In Barry Properties, the Court of Appeals ruled that the automatic establishment of a lien pursuant to the statute then in effect deprived project owners of property without due process. As a result, the statutory mechanics process that had its roots in law going back 238 years was stricken and subsequently replaced by a new Maryland statute.
Instead of putting in a place a structure that establishes a lien upon the affirmative act of the claimant, e.g. recordation of the notice of lien, and also providing owners with prompt notice and right to request a Court vacate the lien, the Maryland legislature imposed a structure that established liens only after review of evidence by a Maryland Circuit Court judge. Md. Code Ann., Real Property Article, sec. 9-106. In Maryland, a subcontractor must give a notice of intent to establish a lien to the project owner within 120 days after last providing labor or materials to the project. Md. Code Ann., Real Property Article, sec. 9-104. A general contractor does not have to provide this notice since it is in privity of contract with the owner and presumably the owner is aware of the status of the parties account. Both subcontractors and general contractors must file a lawsuit to establish and enforce the lien within 180 days after last providing labor and materials. Md. Code Ann., Real Property Article, sec. 9-105. The lien is not established until there is a show cause hearing where a judge has the opportunity to review evidence and decide whether there is sufficient cause to establish the lien. Md. Code Ann., Real Property Article, sec. 9-106.Unless the Court establishes a permanent lien at the show cause hearing, a trial is scheduled within six months for the purpose of establishing a permanent lien, entering judgment in the amount determined to be due, and beginning enforcement phase to liquidate the asset to apply proceeds to the lien claim. Md. Code Ann., Real Property Article, sec. 9-106.
The District of Columbia, D.C. Code sec. 40-301.01, et seq., and the Commonwealth of Virginia, Va. Stat. sec. 43-1, have more traditional lien statutes, but both differ in very significant ways. In both cases, a contractor or subcontractor must file a notice of the lien in the land records in the jurisdiction where the property is located. The deadline for filing these notices differ substantially in the two jurisdictions. In the District of Columbia, the notice must be filed within 90 days of the last day of the project, not the specific claimant's work. D.C. Code sec. 40-301.02. That means that if a subcontractor completes its work on one day and the general contractor completes the project months later, the 90 days runs from the general contractors' last day. Termination of the general contract would also constitute the last day under the statute.
In Virginia, there is also a 90 day timeframe to record a “memorandum of lien”, but it runs from the earlier of the last day of the month in which the claimant contractor last provided labor or materials or from the date the project is completed or terminated. Va. Stat. sec. 43-4. There is also a 150 day rule in Virginia which restricts recovery to labor and materials provided within the 150 day period prior to the recording of the lien. Va. Stat. sec. 43-4. To avoid losing lien rights due to the 150 day rule, a claimant can file any number of memoranda of lien. Va. Stat. sec. 43-4.
As with most business disputes, most lien claims are settled prior to trial. Establishment of the lien typically provides sufficient leverage over the interested parties to encourage dialogue and resolution. In the District of Columbia and Virginia, the cost of establishing the lien (as opposed to the litigation required to enforce it) is low relative to the cost of a establishing a lien in Maryland. This is because Maryland requires litigation up front just to establish the lien, as opposed to requiring litigation only during the enforcement phase which is typically months later. As a result, the Maryland lien statute can be of limited effectiveness for smaller claims, while the procedures in Virginia and the District Court of Columbia enable contractor claimants to enforce their lien rights at less cost of time and resources.
It is also important to note that contractors can only lien private property. Where a project is owned by a state or federal government, contractors need to determine whether a payment bond is posted and pursue its rights against the bond in accordance with the terms of the bond and the applicable statute.
The above rules are only basic rules and timeframes that must be known and followed. Every claim is unique, however, and there are a myriad of technical details that must be adhered to relative to the notices and the actions to enforce. There are also numerous published Court opinions interpreting the statutes. Claimants must be familiar with the applicable statute and case law when pursuing a lien claim. In addition, lien claims may be subject to different defense that can be asserted by the Owner depending on in which jurisdiction the claim is filed. For these reasons, it is important that a contractor engage competent counsel experienced in the construction industry when evaluating, establishing and enforcing a mechanic’s lien claim.
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