A Strong Legal Remedy for Resolving Contractor Payment Disputes
What is a Mechanic’s Lien in the District of Columbia?
A mechanic’s lien in the District of Columbia (Washington DC) is a statutory remedy for “contractors,” and anyone else “directly employed” by them, to recover monies owed for the construction, improvement, or repair of a building.
A mechanic’s lien claim, if properly enforced, results in the establishment of a lien against the owner’s real property (the land and building thereon) where the unpaid construction work and materials were provided. The lien can be used to force a sale of the owner’s interest in the real property as a source of monetary funds to satisfy the amount due. The lien amount equals the amount owed under the contract price, or if no written contract, the reasonable value of the unpaid portion of the project.
The History and Rationale for the Mechanic’s Lien’s in The District of Columbia?
The original rationale in this country for adopting a mechanic’s lien law was to encourage builders to become involved in the construction of the District of Columbia (Washington DC). At that time, there were no automobiles and the term “mechanic” generally referred to builders and skilled tradesmen such as masons and carpenters. The federal government’s credit was not as good back then as it is today. Creating a lien on the building was, and still is, a means of offering security to contractors and subcontractors providing labor and materials prior to payment.
In 1790, Congress approved the creation of a capital along the Potomac River with the precise location to be selected by George Washington. Shortly thereafter, in 1791, the State of Maryland (which, at that time, included the area where the District of Columbia is now located) passed the first Mechanic’s Lien Act in this country. The legislation was introduced in the Maryland Legislature by Thomas Jefferson.
Who Can Assert a Mechanic’s Lien in The District of Columbia?
Under the current District of Columbia mechanic’s lien law, the term “contractor” means the contractor who “contracted with the owner” of the property to perform the construction work, addition, repair or other improvement to the property in question. On a large construction project this would typically be the general contractor who may, in turn, enter into subcontracts with other trades and material suppliers necessary to complete to work. The term “subcontractor” as used herein, refers to any person “directly employed by” the owner’s contractor, such as a subcontractor, material supplier, or labor. Only those who contract directly with the owner or the owner’s contractor are entitled to seek a mechanic’s lien under the District of Columbia mechanic’s lien law.
Sub-subcontractors, those who are not in direct contractual privity with the owner’s contractor, do not have lien rights under the District of Columbia mechanic’s lien law.
Attachment and Preservation of a Mechanic’s Lien in The District of Columbia
In the District of Columbia, a mechanic’s lien attaches at the time of the commencement of the construction of the building. This early commencement date gives a Washington DC mechanic’s lien priority in time over many types of subsequently created liens that attached to the property. For example, a lien resulting from a judgment obtained, or a second mortgage created, after construction of the building was commenced would not have priority over a properly enforced mechanic’s lien in the District of Columbia. However, the mechanic’s lien will terminate unless there is timely filing of a notice of intent to enforce a mechanic’s lien and compliance with the other requirements of the District of Columbia mechanic’s lien laws discussed below.
Notice of Intent to Enforce Mechanic’s Lien – 90 days
Requirements for contractors and subcontractors
A notice of intent to enforce mechanic’s lien must be filed and recorded with the Recorder of Deeds of the District of Columbia no later than 90 days after the completion or termination of the project, whichever occurs earlier. The notice must identify the property subject to the lien and the amount due as well as contain the specified information and documentation required by the District of Columbia mechanic’s lien law. The Recorder of Deeds office publishes a form for this purpose called “Notice of Mechanic’s Lien.”
Additionally, within five (5) business days after recording the notice, a copy must be sent by certified mail to the owner of the property. If the certified mail is returned unclaimed or undelivered, a copy of the recorded notice of mechanic’s lien must be posted on the property in a location generally visible from an entry point.
Additional Delivery Requirement for subcontractors
In addition to certified mail delivery discussed above, subcontractors must also serve an additional notice of Mechanic’s Lien on the owner ”by leaving a copy thereof with said owner or his agent, if said owner or agent is a resident of the District, or if neither can be found, by posting the [notice] on the premises.” An owner typically has no communication with subcontractors; so presumably, this additional form of delivery is to ensure the owner gets notice of its contractor’s failure to pay a subcontractor.
Owner’s Defense of Payment and Subcontractor Notice
Until the District of Columbia property owner receives the required written notice that a subcontractor has not been paid, the owner can make payments to its contractor and rely upon the “defense of payment” to defeat a subcontractor’s mechanic’s lien claim. For example, if prior to receiving a subcontractor’s notice, the owner has paid the contractor in full (and the amount of payment is not disputed), then the subcontractor is not be entitled to a mechanic’s lien on the property. Therefore, it behooves subcontractors to provide the owner with the required notice as soon as possible while monies are still owed to the contractor.
Owner’s Duty to Withhold Payment
Once the subcontractor provides proper notice, the owner has a duty to withhold payments owed the contractor in an amount sufficient to satisfy the contractor’s debts to the subcontractor. Thereafter, the property will be subject to a subcontractor mechanic’s lien up to the amount still owed the contractor at the time the owner received the subcontractor’s notice.
Subcontractors take Subject to Contractual Defenses in the Owner-Contractor Agreement
Subcontractors seeking to enforce a mechanic’s lien take subject to any defenses that the owner has under its contract as against the contractor. As such, the subcontractor’s mechanic’s lien claim in the District of Columbia is only as strong as the rights of the contractor against the owner.
Suit to Enforce Mechanic’s Lien – 180 days
In order to enforce its mechanic’s lien in the District of Columbia, a contractor or subcontractor must also file a lawsuit seeking to enforce the mechanic’s lien in court within 180 days after the date that the Notice of Intent to Enforce Mechanic’s Lien was recorded in the office of the recorder of deeds. Additionally, a notice of pendency of the lawsuit must be recorded in the District of Columbia land records office within 10 days of filing suit. The failure to timely file the lawsuit and record a notice of pendency of action will cause the lien to terminate. The lawsuit, also referred to as a “bill in equity,” must contain specific allegations as set forth in the District of Columbia Mechanic’s Lien law.
Be Specific in Mechanics’ Lien Documentation
The notice of intent to enforce mechanic’s lien and the subsequent lawsuit seeking to enforce mechanic’s lien, referenced above, must contain specific information and documentation as specified in the District of Columbia Mechanic’s Lien Law. Failure to timely include all the require information and documentation can result in the failure to obtain a lien.
Decree of Sale
If the lawsuit establishes that the contractor or subcontractor is entitled to enforce a mechanic’s lien, the court will issue a decree of sale of the land and premises of the owner.
Mechanic’s Lien Waivers
A contractor may waive its mechanic’s lien rights in a construction contract with the owner. However, under the District of Columbia mechanic’s lien law, a waiver of liens in the contract between the owner and the contractor is not effective against a subcontractor.
An owner can, however, require a contractor to obtain signed mechanic’s lien releases from all subcontractors and material suppliers on a project for work performed and materials provided. These releases can be made part of the contract or obtained upon completion of the subcontractors work or provision of materials and, in either case, will protect owners and contractors from mechanic’s liens.
WASHINGTON DC MECHANIC’S LIEN LAW ATTORNEYS
COWIE & MOTT, P.A. is a construction law firm serving Maryland and the District of Columbia. Our construction lawyers and construction law attorneys have extensive experience handling construction law matters and are known for resolving complex construction law claims, including construction defect claims, payment disputes, delay claims, mechanic’s lien actions and other construction project legal disputes. The experienced Maryland construction lawyers and construction litigation attorneys of COWIE & MOTT, P.A. provide legal advice and legal representation on construction law issues to owners, developers, subcontractors, material suppliers, design professionals and construction lenders throughout the state of Maryland and the District of Columbia.