Mechanic’s liens in Maryland provide a powerful recovery tool for general and subcontractors to ensure payment on private construction projects. But contractors should file promptly once a claim emerges lest they lose their rights in a possible sale of the construction property.
While mechanic’s liens in Maryland allow contractors to collateralize payment by obtaining a lien on the building on which the contractor performed work or supplied materials, the lien may be circumvented if the owner sells the property to a bona fide purchaser.
Essentially, if an owner sells the building subject to a mechanic’s lien to an unknowing third party, the contractor may lose its right to file a mechanic’s lien. A couple of factors must occur in order for a contractor to lose its right under this scenario. These include:
- The buyer must be a bona fide purchaser. In order to be a bona fide purchaser, the buyer must purchase the property for a reasonable value and without any notice of any impending claims. The deal must essentially be an arms-length transaction.
- The mechanic’s lien must actually be filed, not pending, at the time of the transaction. While a pending petition to establish and enforce a mechanic’s lien cannot legally stop the sale of a property, it will, from a practical perspective, create a cloud on the title of the property (also known as a lis pendens). This, in turn, should result in notice to the potential buyer that an impending lawsuit and petition for mechanic’s lien has been filed.
The mechanic’s lien statue in Maryland seeks to ensure timely filing of claims by requiring notices to owners and filing of claims within a specific, condensed period. The possibility of losing one’s mechanic’s lien rights as a result of the sale of the property simply exemplifies the need for contractors to file claims quickly.
For more information on understanding construction law and ensuring you remain protected, contact the Maryland lien law professionals at Bowie & Jensen today.