Maryland: Several Decisions Reinforce the Concept of Strict Construction of the Maryland Mechanics' Lien Statute
 
December 16, 2004
 

The Maryland Court of Special Appeals recently reviewed the standards and procedures for perfecting a mechanics’ lien in the state. In two opinions published in February 2003, the Court required strict adherence to the procedures set forth in the Maryland Code to claim a mechanics’ lien.

In Redland Genstar, Inc. et al v. Hardat Marchase et, a contractor, Redland, initiated a mechanics’ lien proceeding based on an unpaid contract. However, after the initial complaint to establish the lien was filed, but before the Court issued its final order establishing the lien, the property was sold at foreclosure. Redland was not notified of the foreclosure proceeding and therefore lost the opportunity to participate in the proceedings. Numerous court proceedings followed, culminating in an action to quiet title to determine the propriety of the foreclosure sale and Redland’s ability to collect proceeds.

Redland argued that the initiation of the case, i.e., the filing of the complaint, was sufficient to establish an interest in the property, thereby requiring notice of the foreclosure proceeding under law. However, the Court concluded that Redland’s filing did not establish an interest in the property at the time of the foreclosure sale, and, therefore, Redland was not entitled to notification of the sale. Consequently, Redland had no avenue with which to collect the monies due via the mechanics’ lien action it had initiated. In reaching this conclusion, the court maintained that until a court issues a final order establishing a lien, there is a lack of sufficient interest in the property to require notice of a foreclosure proceeding. The Court concluded that the mere initiation of an action did not have enough legal value to establish a lien, as the other party is without an opportunity to participate and the Court has not had an opportunity to weigh all the facts.

Although the complaint initiating the mechanics’ lien action is often filed in land records to alert all subsequent interested parties of the existence of a dispute, such an action does not provide a legal basis to collect from any future sale proceeds. Only the timely and expeditious processing of a case can provide the security of a bona fide lien holder. As a result, since Redland had only initiated the mechanics’ lien action prior to foreclosure, without final action by the court, Redland had not perfected its interest in the property.

The Court of Special Appeals proceeded to examine the steps to establish a mechanics’ lien in Benjamin Gravett, et al v. Covenant Life Church. In this matter, Gravett sent several notices to the property owner of an intent to claim a lien, prior to the filing of the complaint as required by law. However, the court determined that the notice sent to the property owner did not “substantially conform” to the requirements of Section 9-104(b) of the Real Property Article of the Maryland Code. The section of the Real Property Article provides a “form” for the Notice to Owner of Intention to Claim a Lien, requiring (1) a description of goods and services provided; (2) the dates the goods and services were provided; (3) for whom and in what context the goods and services were provided; and (4) the amount due and unpaid.

Gravett sent two notices to the Church indicating an intent to claim the lien, but had failed to identify the dates that the goods and services were provided. Although Gravett argued that the “form” identified in the Real Property Article was only meant to provide guidance, and that in all other respects the notice complied with the language in the Annotated Code, the Court found the defect fatal and upheld the lower court’s dismissal of the suit to establish the lien.

Under such explicit direction from the Court, any future notice(s) sent to property owners should clearly encompass the four issues identified in the code and conform in all material aspects to the language provided by Section 9-104(b).

For more information, e-mail Erica A. Leatham at erica.leatham@hklaw.com or call toll free, 1-888-688-8500.