An example of a scenario involving Mechanics’ Liens
A property owner contracts with a general contractor who then lines up workers and materials to complete a project. The owner periodically fills the general contractor’s payment requests so that they can pay subcontractors and purchase supplies. Everything is going smoothly until the owner receives a legal document in the mail that states: “Notice of Intention to Claim Mechanics’ Lien” for a large sum of money owed to one of the subcontractors. Owners are often shocked by Mechanics’ Liens, claiming that they’ve already paid the general contractor in full. Unfortunately, that doesn’t mean the general contractor paid the subcontractors.
Dealing with a Mechanics’ Lien
Mechanics’ Liens are legal documents that force a property owner or buyer to pay debts to a construction company for materials or work performed. Mechanics’ Liens must be resolved before ownership of the property can be transferred. Mechanics’ Liens are dangerous because they can be filed up to 90 days after the supplies have been bought and the work has been completed. When sellers have work performed before closing and fail to pay any contractor, a Mechanics’ Lien may be filed even after the closing has occurred. Unnoticed or unresolved Mechanics’ Liens can threaten real estate transactions and even threaten the property owners’ claim to their title.
Properties and Work Subject to Mechanics’ Liens
In Maryland, Mechanics’ Liens may be placed on new construction, but also on repair and improvement projects that represent 15% or more of the property’s overall value. This percentage and the rules vary depending on what type work is done and what type of property is repaired or improved. In general it all depends on the relation between the project cost and the value of the property. The law also factors in the type of property and who the work is completed for.
- The list detailing what “work done” and “materials furnished” are subject to a Mechanics’ Lien claim is exhaustive, including everything from engineering, land surveying, and interior design to equipment leasing, landscaping, and fencing.
Title Insurance: A Protection from Mechanics’ Liens
Because the laws and statues governing Mechanics’ Liens can be quite confusing, it’s best to work with an attorney and an experienced title company. An attorney can make sure any existing Mechanics’ Liens are valid, and a title company can issue title insurance to protect you from Mechanics’ Liens in future transactions. Most title insurance companies offer Mechanics’ Lien coverage that protect the owner’s rights and cover costs that arise during litigation. Title companies can also help buyers discover Mechanics’ Liens prior to closing.
For more information regarding the various parties’ rights and obligations during the construction process, please contact an attorney at Deardrorff, Rath & Pichon, LLC.
Lakeside Title Company is a title insurance company that serves the entire DC Metro area from 14 locations across Maryland, Pennsylvania, and Virginia. Offering title insurance and closing services for refinances, residential sales, 1031 exchanges, and more closing over 4,000 transactions a year. If you found this blog helpful, we encourage you to share it with your friends, family, and coworkers. For more information, please visit our homepage.
Need Legal Advice?
If you found this information helpful, please share with a colleague, co-worker, client, friend or family member. Question for an attorney regarding further information on Mechanics’ Liens? Click here to contact Deardorff, Rath & Pichon, LLC, affiliated law firm of Lakeside Title Company.