Who is responsible for payment to release the lien?
Full Question:
Answer:
A lien is the right to retain the lawful possession of the property of another until the owner fulfills a legal duty to the person holding the property, such as the payment of lawful charges for work done on the property. The right of lien generally arises by operation of law, but in some cases it is created by express contract. Liens that arise in construction situations include construction liens, contractor liens, mechanic liens, attorney liens, architect liens and other liens applicable in your state. By virtue of express statutes in most states, mechanics and material men or persons who furnish materials for the erection of houses or other buildings, are entitled to a lien or preference in the payment of debts out of the houses and buildings so erected and to the land, to a greater or lessor extent, on which they are erected. It is used to enforce payment in order to clear the title to the property, because property with a lien on it cannot be easily sold until the lien is satisfied (paid off). In some states, a claim must be filed in the office of the clerk of the court or a suit brought within a limited time. On the sale of the building these liens are to be paid pro rata. In some states no lien is created unless the work done or the goods furnished amount to a certain specified sum, while in others there is no limit to the amount.
The priority of liens on a construction project does not depend upon the time of completion of the particular job, but rather everything relates back to the first visible commencement of the work. This stipulation means the final work, such as painting, is equal in priority to the initial work of laying a cement foundation. Therefore, during the entire work of construction, the owner must obtain lien releases or waivers of lien from each subcontractor and material supplier. Without these waivers or releases the real estate is subject to liens of all the subcontractors, even if the general contractor, though paid in full, fails to pay the subcontractors. Lien claimants who are contractors or subcontractors are protected under this legal doctrine because all their materials and labor are "buried" in the real estate, having become part of it. Unlike mortgage liens, however, the liens of these claimants cannot force a foreclosure. People having a home built can require contractors and subcontractors to provide lien releases or waivers as part of a written project contract. The contract can mandate a lien release be issued before the contractor receives payment for services, in which case it is called a lien waiver. If payments are made to a general contractor in stages for work performed by subcontractors, the homeowner can obtain lien releases from the various subcontractors as their part of the project is completed. Sometimes, construction loan documents drafted by a bank may indicate that the bank will obtain lien releases, but the bank may do this solely for its own benefit. Therefore, the property owner's requiring lien releases should be clearly stated and independent of any agreement made by or with the bank.
Although the terms lien waiver and lien release seem to be interchangeable, a release demonstrates completion and payment, so as to prove any claim has been satisfied, while a waiver demonstrates a relinquishment of a known right. Waivers are typically obtained prior to commencement of any work, whereas releases are subsequently obtained. Waivers of lien must be in writing, give a sufficient description of the real estate, and be signed by the one with authority to file or claim a lien. No payment needs to be made in advance if the subcontractor agrees to release the land from the lien and rely only on the credit of the owner or general contractor for payment of the debt.
The filing requirements and statutes of limitation for these liens vary according to the law of each state. Liens can generally be removed by the payment of the amount owed. This payment can occur at any time up to and including the stage at which the closing documents for the sale of the property are signed. Liens can be discharged after a certain length of time. Therefore, if a property owner is in no hurry to sell the property, and the lien holder is not seeking to foreclose, it may make sense to do nothing and wait until the lien expires. If the lien is not renewed, the cloud on the title will no longer exist. If a person pays and satisfies a lien in order to have it discharged, a written, legally sufficient release or satisfaction must be obtained and recorded in the appropriate government office to clear title to the property.
The following are Maryland statutes:
§ 9-102 REAL PROP. Properties subject to lien.
(a) Buildings. — Every building erected and every
building repaired, rebuilt, or improved to the extent of
15 percent of its value is subject to establishment of a lien
in accordance with this subtitle for the payment of all
debts, without regard to the amount, contracted for work
done for or about the building and for materials furnished
for or about the building, including the drilling and
installation of wells to supply water, the construction or
installation of any swimming pool or fencing, the sodding,
seeding or planting in or about the premises of any shrubs,
trees, plants, flowers or nursery products, the grading,
filling, landscaping, and paving of the premises, the
provision of building or landscape architectural services,
engineering services, or land surveying services, and the
leasing of equipment, with or without an operator, for use
for or about the building or premises.
(b) Waterlines, sewers, drains and streets in development. —
If the owner of land or the owner's agent contracts for the
installation of waterlines, sanitary sewers, storm drains, or
streets to service all lots in a development of the owner's
land, each lot and its improvements, if any, are subject, on
a basis pro rata to the number of lots being developed, to
the establishment of a lien as provided in subsection (a) of
this section for all debts for work and material in
connection with the installation.
(c) Machines, wharves, and bridges. — Any machine,
wharf, or bridge erected, constructed, or repaired within
the State may be subjected to a lien in the same manner as a
building is subjected to a lien in accordance with this
subtitle.
(d) Exemptions. — However, a building or the land on
which the building is erected may not be subjected to a lien
under this subtitle if, prior to the establishment of a lien
in accordance with this subtitle, legal title has been
granted to a bona fide purchaser for value.
(e) Filing of petition constitutes notice to purchaser. —
The filing of a petition under § 9-105 shall constitute
notice to a purchaser of the possibility of a lien being
perfected under this subtitle.
§ 9-103 REAL PROP. Extent, scope of lien.
(a) In general. — A lien established in accordance with this
subtitle shall extend to the land covered by the building and to as much
other land, immediately adjacent and belonging in like manner to the
owner of the building, as may be necessary for the ordinary and useful
purposes of the building. The quantity and boundaries of the land may be
designated as provided in this section.
(b) Designation of boundaries. — An owner of any land who desires
to erect any building or to contract with any person for its erection may
define, in writing, the boundaries of the land appurtenant to the
building before the commencement of construction, and then file the
boundaries for record with the clerk of the circuit court for the
county. The designation of boundaries shall be binding on all persons. If
the boundaries are not designated before the commencement of a building,
the owner of the land or any person having a lien or encumbrance on the
land by mortgage, judgment, or otherwise entitled to establish a lien in
accordance with this subtitle may apply, by written petition, to the
circuit court for the county to designate the boundaries.
(c) Unfinished building; repaired or rebuilt building. —
(1) If a
building is commenced and not finished, a lien established in accordance
with this subtitle shall attach to the extent of the work done or
material furnished.
(2) If a building is erected, or repaired, rebuilt or improved to the
extent of 25 percent of its value, by a tenant for life or years or by a
person employed by the tenant, any lien established in accordance with
this subtitle applies only to the extent of the tenant's interest.
§ 9-104 REAL PROP. Notice to entitle subcontractor to lien; form
of notice; limitation on lien against single family dwellings.
(a) Notice required to entitle subcontractor to lien. —
(1) A
subcontractor doing work or furnishing materials or both for or about a
building other than a single family dwelling being erected on the owner's
land for his own residence is not entitled to a lien under this
subtitle unless, within 120 days after doing the work or furnishing the
materials, the subcontractor gives written notice of an intention to
claim a lien substantially in the form specified in subsection (b) of
this section.
(2) A subcontractor doing work or furnishing materials or both for or
about a single family dwelling being erected on the owner's land for his
own residence is not entitled to a lien under this subtitle unless,
within 120 days after doing work or furnishing materials for or about
that single family dwelling, the subcontractor gives written notice of an
intention to claim a lien in accordance with subsection (a)(1) of this
section and the owner has not made full payment to the contractor prior
to receiving the notice.
(b) Form of notice. — The form of notice is sufficient for the
purposes of this subtitle if it contains the information required and is
substantially in the following form:
"Notice to Owner or Owner's Agent of
Intention to Claim a Lien
________________________________________________________________
(Subcontractor) did work or furnished material for or about the building
generally designated or briefly described as ____________________________
____________________________________ ____________________________________
____________________________
The total amount earned under the subcontractor's undertaking to the date
hereof is $ ______________ of which $ _______________ is due and unpaid
as of the date hereof. The work done or materials provided under the
subcontract were as follows: (insert brief description of the work done
and materials furnished, the time when the work was done or the materials
furnished, and the name of the person for whom the work was done or to
whom the materials were furnished).
I do solemnly declare and affirm under the penalties of perjury that
the contents of the foregoing notice are true to the best of the
affiant's knowledge, information, and belief.
_________________________
(Individual)
on behalf of _________________________
(Subcontractor) (Insert if
subcontractor is not an
individual)"
(c) Notice by mail or personal delivery. — The notice is
effective if given by registered or certified mail, return receipt
requested, or personally delivered to the owner by the claimant or his
agent.
(d) More than one owner — If there is more than one owner, the
subcontractor may comply with this section by giving the notice to any of
the owners.
(e) Notice by posting. — If notice cannot be given on account of
absence or other causes, the subcontractor, or his agent, in the presence
of a competent witness and within 120 days, may place the notice on the
door or other front part of the building. Notice by posting according to
this subsection is sufficient in all cases where the owner of the
property has died and his successors in title do not appear on the public
records of the county.
(f) Payments by owner to contractor after notice; limitation on lien
against certain single family dwellings. —
(1) On receipt of notice
given under this section, the owner may withhold, from sums due the
contractor, the amount the owner ascertains to be due the subcontractor
giving the notice.
(2) If the subcontractor giving notice establishes a lien in
accordance with this subtitle, the contractor shall receive only the
difference between the amount due him and that due the subcontractor
giving the notice.
(3) Notwithstanding any other provision of this section to the
contrary, the lien of the subcontractor against a single family dwelling
being erected on the land of the owner for his own residence shall not
exceed the amount by which the owner is indebted under the contract at
the time the notice is given.
§ 9-105 REAL PROP. Filing required to establish lien: required
documents; docketing, process, pleadings.
(a) In general. — In order to establish a lien under this
subtitle, a person entitled to a lien shall file proceedings in the
circuit court for the county where the land or any part of the land is
located within 180 days after the work has been finished or the materials
furnished. The proceedings shall be commenced by filing with the clerk,
the following:
(1) A petition to establish the mechanic's lien, which shall
set forth at least the following:
(i) The name and address of the petitioner;
(ii) The name and address of the owner;
(iii) The nature or kind of work done or the kind and amount of
materials furnished, the time when the work was done or the materials
furnished, the name of the person for whom the work was done or to whom
the materials were furnished and the amount or sum claimed to be due,
less any credit recognized by the petitioner;
(iv) A description of the land, including a statement whether
part of the land is located in another county, and a description adequate to
identify the building; and
(v) If the petitioner is a subcontractor, facts showing that the
notice required under § 9-104 of this subtitle was
properly mailed or served upon the owner, or, if so authorized, posted on
the building. If the lien is sought to be established against two or more
buildings on separate lots or parcels of land owned by the same person,
the lien will be postponed to other mechanics' liens unless the
petitioner designates the amount he claims is due him on each building;
(2) An affidavit by the petitioner or some person on his behalf,
setting forth facts upon which the petitioner claims he is entitled to
the lien in the amount specified; and
(3) Either original or sworn, certified or photostatic copies
of material papers or parts thereof, if any, which constitute the
basis of the lien claim, unless the absence thereof is explained
in the affidavit.
(b) Docketing; process; pleadings. — The clerk shall docket the
proceedings as an action in equity, and all process shall issue out of and
all pleadings shall be filed in the one action.
§ 9-106 REAL PROP. Procedure after filing claim.
(a) Review of pleadings and documents filed; order to show cause;
opposing affidavit; answer showing cause. —
(1) When a petition to
establish a mechanic's lien is filed, the court shall review the
pleadings and documents on file and may require the petitioner to
supplement or explain any of the matters therein set forth. If the court
determines that the lien should attach, it shall pass an order that
directs the owner to show cause within 15 days from the date of service
on the owner of a copy of the order, together with copies of the
pleadings and documents on file, why a lien upon the land or building and
for the amount described in the petition should not attach.
Additionally, the order shall inform the owner that:
(i) He may appear at the time stated in the order and present
evidence in his behalf or may file a counteraffidavit at or before that
time; and
(ii) If he fails to appear and present evidence or file a
counteraffidavit, the facts in the affidavit supporting the petitioner's
claim shall be deemed admitted and a lien may attach to the land or
buildings described in the petition.
(2) If the owner desires to controvert any statement of fact
contained in the affidavit supporting the petitioner's claim, he must
file an affidavit in support of his answer showing cause. The failure to
file such opposing affidavit shall constitute an admission for the
purposes of the proceedings of all statements of fact in the affidavit
supporting the petitioner's claim, but shall not constitute an admission
that such petition or affidavit in support thereof is legally
sufficient.
(3) An answer showing cause why a lien should not be established in the
amount claimed shall be set down for hearing at the earliest possible time.
(b) Final order; interlocutory order —
(1) If the pleadings,
affidavits and admissions on file, and the evidence, if any, show that
there is no genuine dispute as to any material fact and that the lien
should attach as a matter of law, then a final order shall be entered
establishing the lien for want of any cause shown to the contrary.
Further, if it appears that there is no genuine dispute as to any portion
of the lien claim, then the validity of that portion shall be established
and the action shall proceed only on the disputed amount of the lien
claim.
(2) If the pleadings, affidavits and admissions on file and the
evidence, if any, show that there is no genuine dispute as to any
material fact and that the petitioner failed to establish his right to a
lien as a matter of law, then a final order shall be entered denying the
lien for cause shown.
(3) If the court determines from the pleadings, affidavits and
admissions on file, and the evidence, if any, that the lien should not
attach, or should not attach in the amount claimed, as a matter of law,
by any final order, but that there is probable cause to believe the
petitioner is entitled to a lien, the court shall enter an interlocutory
order which:
(i) Establishes the lien;
(ii) Describes the boundaries of the land and the buildings to
which the lien attaches;
(iii) States the amount of the claim for which probable cause is
found;
(iv) Specifies the amount of a bond that the owner may file to have
the land and building released from the lien;
(v) May require the claimant to file a bond in an amount that the
court believes sufficient for damages, including reasonable attorney's
fees; and
(vi) Assigns a date for the trial of all the matters at issue in
the action, which shall be within a period of six months. The owner or
any other person interested in the property, however, may, at any time,
move to have the lien established by the interlocutory order modified or
dissolved.
(c) Bond. — The amount of and the surety on any bond shall be
determined and approved pursuant to the Maryland Rules except as set
forth in this subtitle. The petitioner, or any other person interested in
the property, however, if not satisfied with the sufficiency of a surety
or with the amount of any bond given, may, at any time before entry of a
final decree, apply to the court for an order requiring an additional
bond, and upon notice to the other parties involved, the court may order
the giving of such additional bond as it may deem proper. In lieu of
filing bond, any party may deposit money in an amount equal to the amount
of the bond which would otherwise be required, pursuant to the Maryland
Rules.
(d) Trial on matters at issue. — Until a final order is entered
either establishing or denying the lien, the action shall proceed to
trial on all matters at issue, as in the case of any other proceedings in
equity.
§ 9-107 REAL PROP. Attachment of lien to land outside county:
procedure; time of attachment.
(a) Filing of documents with clerk. — If any part of the land
is located within another county and the petitioner desires that
the lien attach to the land in that county, the petitioner shall
file a certified copy of the docket entries, of the court order,
and of any required bond with the clerk of the circuit court for
that county.
(b) Time of attachment. — A lien attaches to the land or
building in a county as of the time the documents required to be
filed under subsection (a) of this section are filed with the clerk of the
circuit court of that county.
§ 9-108 REAL PROP. Satisfaction of liens after sale of land under
foreclosure or execution.
If all or any part of the land or buildings against which a mechanic's
lien has been established pursuant to this subtitle shall be sold under
foreclosure or a judgment, execution or any other court order, all liens
and encumbrances on such property shall be satisfied in accordance with
their priority, subject to the limitation in the next sentence of this
section. If the proceeds of the sale are insufficient to satisfy all
liens established pursuant to this subtitle, then all proceeds available
to satisfy each such lien shall be stated by the court auditor as one
fund, and the amount to be disbursed to satisfy each lien established
pursuant to this subtitle shall bear the same proportion to that fund as
the amount of such lien bears to the total amount secured by all such
liens, without regard to priority among such liens.
§ 9-109 REAL PROP. Expiration or continuance of right to enforce
lien.
The right to enforce any lien established under this subtitle expires
at the end of one year from the day on which the petition to establish
the lien was first filed. During this time the claimant may file a
petition in the lien proceedings to enforce the lien or execute on any
bond given to obtain a release of the land and building from the lien. If
such petition is filed within the one-year period, the right to a lien or
the lien, or any bond given to obtain a release of lien, shall remain in
full force and effect until the conclusion of the enforcement proceedings
and thereafter only in accordance with the decree entered in the case.
§ 9-110 REAL PROP. Right to establish mechanic's lien not waived
by giving credit or taking security.
No person having the right to establish a mechanics' lien waives the
right by granting a credit, or receiving a note or other security, unless
it is received as payment or the lien right is expressly waived.
§ 9-111 REAL PROP. Preservation of right to institute personal
action.
Nothing in this subtitle affects the right of any person, to whom any
debt is due for work done or material furnished, to maintain any personal
action against the owner of the building or any other person liable for
the debt.
§ 9-112 REAL PROP. Law considered remedial; construction; amendment
to proceedings.
This law is remedial and shall be so construed to give effect to its
purpose. Any amendment shall be made in the proceedings, commencing with
the claim or lien to be filed and extending to all subsequent
proceedings, as may be necessary and proper. However, the amount of the
claim or lien filed may not be enlarged by amendment.
§ 9-113 REAL PROP. Provisions prohibited in executory contracts;
provisions conditioning payment.
(a) In general. — An executory contract between a contractor and
any subcontractor that is related to construction, alteration, or repair
of a building, structure, or improvement may not waive or require the
subcontractor to waive the right to:
(1) Claim a mechanics' lien; or
(2) Sue on a contractor's bond.
(b) Provisions conditioning payment to subcontractor on payment of
contractor. — A provision in an executory contract between a
contractor and a subcontractor that is related to construction,
alteration, or repair of a building, structure, or improvement and that
conditions payment to the subcontractor on receipt by the contractor of
payment from the owner or any other third party may not abrogate or waive
the right of the subcontractor to:
(1) Claim a mechanics' lien; or
(2) Sue on a contractor's bond.
(c) Void provisions. — Any provision of a contract made in
violation of this section is void as against the public policy of
this State.
§ 9-114 REAL PROP. Release of lien given to owner upon payment
in full; effect of signed release.
(a) Signed release of lien. — At the time of settlement or
payment in full between a contractor and an owner, the contractor shall
give to the owner a signed release of lien from each material supplier
and subcontractor who provided work or materials under the contract.
(b) Effect of signed release. — An owner is not subject to a lien
and is not otherwise liable for any work or materials included in the
release under subsection (a) of this section.
