Category: Construction Law – Mechanic’s Liens
Unmasking Maryland’s “Material Papers” Mechanic’s Lien Requirement
The Typical Mechanic’s Lien Process
In virtually every other state of the union, a mechanic’s lien is established and filed similarly to a mortgage note – by filing directly with the office of land records or recorder of deeds. At that moment in time, the world is put on notice that a security interest exists upon the real property in question, affecting its sale or transfer and otherwise placing a “cloud” upon it.
“At that moment in time, the world is put on notice that a security interest exists upon the real property in question, affecting its sale or transfer and otherwise placing a “cloud” upon it.”
The lien will generally remain for anywhere between 6-months to 1-year, varying from state to state, and is often enough to encourage payment to the lienholder, or at least engender serious negotiation. To enforce, i.e., foreclose upon the lien, a lawsuit is generally necessary – again, much like a mortgage in default.
Not So in The Free State ¹
Over 50 years ago, Maryland’s highest court invalidated this procedure as a constitutional violation of a property owner’s right to notice and due process of law. It deemed the cloud placed upon title by virtue of a mechanic’s lien – and consequent restriction on free transfer – to be a government “taking” which cannot occur absent formal notice and opportunity to be heard in a court of law.
As a crucial part of the mechanic’s lien lawsuit, Maryland’s Lien Law requires that the “material papers which constitute the basis of the lien claim” be attached to the petition filed in court.² Like the requirements of any statute, strict compliance is required, and many efforts at establishing a mechanic’s lien have been tossed for failure to have attached the “material papers” supporting the lien.
As a crucial part of the mechanic’s lien lawsuit, Maryland’s Lien Law requires that the “material papers which constitute the basis of the lien claim” be attached to the petition filed in court.²
Ordinarily, a signed contract will be sufficient “material basis” for a lien up to the amount of the contract. The same is true of signed change orders. Things become murkier when the lien amount sought is more than the amounts already paid for pursuant to the contract and signed change orders (and of course, I would not be correctly wearing my ‘lawyer hat’ if I did not use this opportunity to chastise a contractor or subcontractor for performing extra work without a signed change order! Always get a signed change order, or at least a direction to perform the extra work on a cost-plus basis, before doing the work!).
Extra Work & Unapproved Change Orders
In the case of extra work for which a change order was not executed, the best practices among the Maryland construction bar has been to attach nearly every scrap of paper identifying a cost as to the extra work. This would include invoices from material suppliers and equipment rentals, and even Home Depot receipts, as well as evidence showing payment for construction labor, including by the lien claimant’s own forces (which is really no different than a certified payroll requirement which is practically standard in federal and state construction). Indeed, this documentation should be carefully assembled and kept near and dear until a signed change order, or the litigation surrounding it is complete. Think of it as an audit of the extra work.
Ultimately, both the judge and the other side’s lawyer will be expecting this kind of documentation to accompany any lien claim over and above the executed contract and change order value – the Free State’s version of due process of law. Don’t raise a bright red flag by omitting it!
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