Subcontractors Can Make a Project Owner Pay for Services and Materials Provided by the Subcontractor on a Construction Project, When Payment is not Received from the General Contractor

Construction projects almost always involve framers, carpenters, plumbers, electricians, drywall installers, and other subcontractors contracting with a general contractor to supply services and materials to the building project (unless the property owner directly contracts with tradesmen). If the framers, carpenters, plumbers, electricians, drywall installers, or other subcontractors are not paid for their work in a timely manner, they can sue the general contractor for breach of contract. Separate and in addition to bringing a lawsuit for breach of contract against the general contractor, subcontractors also can seek to establish a mechanic’s lien — to make the owner of the property pay for the provided services or supplies if the general contractor refuses to pay, or is no longer able to pay. This gives contractors and subcontractors on construction projects a powerful tool to obtain payment for materials and services – and it is something that property owners need to aware of.

Through a mechanic’s lien, a person or company that provides labor or materials on a construction project can place a lien against improved real property for the value of unpaid labor or materials – but only if the requirements of the mechanic’s lien statute are strictly adhered to.

Maryland’s mechanic’s lien statute is complicated, and this article provides only a general summary, without addressing all of the requirements and nuances. Generally speaking, any person or company that furnishes work or materials to a construction project in Maryland pursuant to a contract may establish a mechanic’s lien if they are owed money on a project. Contractors, subcontractors and suppliers can all claim such a lien, regardless of whether they have a contract directly with the owner of the property, as long as the labor was performed for or about the subject building, and as long as the materials were for the building project.

A mechanic’s lien is only available for certain types of construction projects in Maryland. Newly constructed buildings are subject to mechanic’s liens, though what exactly constitutes a “building” is sometimes a contested issue, because not every type of structure on land constitutes a building for these purposes. For construction projects that involve repair or renovation of existing buildings, a mechanic’s lien is only available in Maryland if the project involves the repair, re-building or improvement of the building to the extent of 15% of its value. Condominium units and the common elements of condominiums are also subject to mechanic’s liens, but there are special notice requirements apply to condominiums.

An important aspect of Maryland mechanic’s liens is a requirement to give written notice of an intention to seek a lien in some circumstances, and strict time limitations for giving notice and bringing suit.

Anyone seeking a mechanic’s lien who does not have a direct contractual relationship with the property owner – for example, subcontractors, and in many cases material suppliers – must comply with notice provisions set forth in the mechanic’s lien statute. When this type of notice is required, it must be mailed by the lien claimant to the property owner within 120 days after the claimant performed the work or furnished the materials. There are nuances regarding when this 120-day period begins to run, and numerous court cases address this issue.

Separate and apart from giving any required notice of an intention to claim a mechanic’s lien, a petition seeking to establish the mechanic’s lien must be filed in the appropriate Circuit Court no later than 180 days after the work has been finished or the materials furnished. The correct parties must be named as defendants in the suit, and there are detailed requirements for what must be included in the petition that is filed with the court.

After a petition is filed with the court, there is a two-step process whereby the court first reviews the papers that have been filed, and holds an initial show-cause process and proceeding to determine if there is sufficient cause to establish an interim mechanic’s lien. The court typically will set a bond for entry of an interim lien. If an interim lien is established, then in a second stage the court will later hold a trial on the merits of whether the mechanic’s lien should continue thereafter until satisfied. At any time after a petition to establish a mechanics lien is filed, the property owner can file a petition to have the property released from the lien upon the filing of a bond sufficient to protect the lien claimant. Once a lien is established, the lien claimant then has one year to file a petition to enforce the lien.

Mechanic’s liens can be an important method for contractors, subcontractors and suppliers to ensure payment, but they are complicated and are subject to strict time constraints. The Maryland mechanic’s lien statute differs from those of other states in many ways. If you are a contractor, subcontractor or supplier seeking payment for labor or materials provided in Maryland, or if you are a Maryland property owner that has received notice that someone intends to assert a mechanic’s lien, or has already petitioned the court for a mechanic’s lien, I encourage you to promptly consult with an attorney who is knowledgeable about this area of law. Very strict limitations apply to these claims.

Mechanic’s liens are not available for government construction projects, but somewhat similar protections are provided to subcontractors on government construction projects through the bonding requirements in the Miller Act (for federal government construction projects) and the Maryland Little Miller Act (for state government construction projects). Other laws also protect subcontractors, such as the Maryland trust fund statute and the Maryland Prompt Payment Act.

Steve Lewicky

(410) 489-1996