Jackson Nichols and Paul Felipe Williamson | Cohen Seglias Pallas Greenhall & Furman
A mechanics’ lien is an encumbrance on real property or a leasehold that acts as security for unpaid labor, material or construction services. Such liens are typically available to contractors on private jobs if they meet certain statutory requirements, though most states limit or outright preclude the ability to file mechanics’ liens on public jobs.
Mechanic’s Liens Are Leverage
Mechanics’ liens are powerful tools for contractors to help collect payment because they provide an extraordinary remedy—the sale of the property to satisfy the lien. To balance this powerful tool, contractors must strictly adhere to a number of specific requirements that vary widely from one state to the next. Unlike many other areas of the law, mistakes relating to mechanics’ liens often lead to losing one’s lien rights without any possibility of forgiveness. The loss of lien rights does not, however, equate to the loss of all rights and claims if you know how to preserve them.
Don’t Wait to Exercise Your Rights
One of the most important considerations is the timing of filing a lien. Many contractors wait too long when they have a claim and end up losing their mechanics’ liens rights. In the DC Metro area, a complex web of different deadlines and filing requirements makes these timing elements difficult to navigate. Understanding your rights is key. As a general rule, however, it is best to start preparing to file a lien if it is 45 days after completion of the project and you are concerned about getting your contract balance paid to allow sufficient time to prepare the lien. Given the complexity of lien filings and the potential loss of lien rights for even minor mistakes, it is recommended that contractors consult legal counsel for such filings.
Time Limits in DC
DC requires contractors to file a notice of mechanics’ lien in the Recorder of Deeds office within “90 days after the earlier of the completion or termination of the project.” This is generally understood to mean within 90 days after all work on the project is completed (even if your work finished earlier). However, the DC Court of Appeals has yet to weigh in definitively on this issue. To be cautious, it is best to record your lien within 90 days of completion of your scope of work.
You must serve a copy of the notice to the owner via certified mail within five business days after recording it. Failure to do so could jeopardize your lien rights. If the certified mail is returned undelivered, you can post a copy of the recorded notice at a visible entry point to the property at issue. Finally, contractors asserting a lien on a DC project must file their lien enforcement lawsuit within 180 days from the date of recording the notice.
Time Limits in Maryland
Maryland requires subcontractors to serve a notice of intent to lien on the owner within 120 days after the subcontractor has completed the work (i.e., last date labor was performed) or furnished materials (i.e., the date they are delivered). It is recommended that such notice be given via certified mail at a minimum, if not via a private process server. General contractors who have a direct contract with the owner are not required to provide a notice of intent to lien since the owner knows whether a general contractor has been paid. Additionally, certain elements must be included in the notice, and Maryland Real Property Code Section 9-104 sets forth a form a subcontractor can fill out with that information.
The statute requires all contractors to file a lawsuit to enforce the mechanics’ lien (called a petition to establish and enforce lien) within 180 days of the last work performed. The contractor claimant must finish its work before it can file the petition.
After the petition is filed, the court will promptly review it and issue a show cause order to the owner of the property at issue directing them to respond to facts stated in the petition. The show cause order also will set a hearing at which the contractor must establish basic facts demonstrating its right to assert a lien claim. If the court determines that the contractor is likely to prevail at the final trial, it will issue an “interlocutory order,” which essentially is a temporary lien, and allow the parties to go to discovery (the exchange of documents and information via written requests and depositions). A final hearing must take place within six months of the interlocutory order.
Time Limits in Virginia
Virginia law requires contractors to file mechanics’ liens in the land records office of the county where the project is located either:
- Within 90 days of the last supply of labor or materials (if the project is completed), or
- Within 90 days of the last day of the month in which the contractor last performed labor or supplied materials, if the project is ongoing.
Virginia’s lien law has an additional timing component, known as the 150-Day Rule. As noted above, a contractor must count forward from the last day it performed work or supplied materials to a project. In addition, the contractor must also count 150 days backwards from that day to determine how much labor and/or materials can be included in its lien. Essentially, contractors liening a Virginia project may only lien in 150-day chunks of time. Because of this rule, contractors may need to file multiple liens on a Virginia project to capture all of the labor/material they provided to that project.
Contractors in Virginia also must file a complaint to enforce mechanics’ lien within “six months from the time when the Memorandum of Lien was recorded or [within] 60 days from the time the building structure or railroad was completed or work thereon otherwise terminated, whichever time shall last occur . . . .” Generally, this means that the complaint must be filed within six months after the lien is recorded in the land records office.
Regardless of jurisdiction, contractors would be prudent to research lien requirements before commencing work on a project and to consult with legal counsel to determine the best strategy for being able to take advantage of the potential benefits a mechanics’ lien can offer.