Selling a house with a mechanic’s lien or a half finished renovation in Maryland: the 180 day clock, the 15 percent rule, and the as-is way out

A renovation that stalls creates two problems at once. The house is harder to sell because it is torn apart, and the money dispute with the contractor can turn into a lien that the title company will not close around. Maryland handles contractor liens differently from almost every other state, and that difference is good news for homeowners once they understand it. This article explains how a mechanic’s lien is created here, the clocks that run on the contractor, what to do when the letter arrives, and how a house that is half open sells.

How a Maryland mechanic’s lien is actually created

In most states a contractor records a lien claim at the courthouse and the owner has to sue to remove it. Maryland works the other way around. Under Title 9 of the Real Property Article, a contractor or supplier who wants a lien must file a petition to establish it in the circuit court for the county where the house sits, and the lien exists only once a judge finds probable cause and enters an order. Until then there is a claim, not a lien. A letter that says the contractor has placed a lien on your house, or a document recorded in the land records without a court order behind it, is not a lien and a title company can usually close over it with a release or an affidavit.

The clocks are short. A subcontractor or supplier who did not contract with you directly must send you a written notice of intention to claim a lien within 120 days after it last did work or delivered materials. Everyone, including the general contractor you hired, must file the petition within 180 days after the work was finished or the materials furnished. Miss either deadline and the lien right is gone, though the contractor can still sue you on the contract like any other creditor. Once a lien is established, the contractor has to bring an action to enforce it within one year after the petition was filed or it expires.

The 15 percent rule

The part of the statute that surprises contractors is the threshold for work on an existing house. A mechanic’s lien reaches a building that was erected, and a building that was repaired, rebuilt or improved to the extent of 15 percent of its value. A new build or an addition clears that bar easily. A kitchen remodel, a bathroom, a roof or a deck on a house worth several hundred thousand dollars often does not, and when the job does not reach 15 percent of the building’s value, the lien remedy is not available at all. The contractor keeps the right to sue for the money, but cannot cloud the title while doing it. Ask your attorney to run that math before you treat a lien threat as a closing problem.

Licensing changes who has the upper hand

Home improvement work in Maryland requires a license from the Maryland Home Improvement Commission, and a contractor who did home improvement work without one has a serious problem enforcing the contract in a Maryland court. If the contractor who walked off was unlicensed, say so to your attorney in the first conversation, because it may end the money claim as well as the lien claim. If the contractor was licensed, the Commission runs a guaranty fund that pays homeowners for actual losses caused by a licensed contractor’s poor or incomplete work, capped per claim, and a complaint there costs you nothing to file. Check the license number on the contract against the Commission’s public lookup before you decide which path you are on.

When the notice arrives

Do not ignore it and do not pay it in a panic. Read the date of the last work, count the 120 and 180 day windows, and pull every payment record, change order and text message about the job into one folder. If you paid the general contractor and a subcontractor is the one writing, the question of whether you can be made to pay twice turns on the facts and the type of project, which is a conversation for a real estate attorney, not a website. If a petition has actually been filed, you have a right to answer it and a short deadline to do so, and a judge decides whether probable cause exists before any lien attaches. Settling for a fair number in exchange for a recorded release is often cheaper than the hearing, and a release is what the title company wants to see.

What a half finished renovation does to the buyer pool

Set the lien aside and look at the house. A kitchen with no cabinets, a bathroom with no fixtures, open walls or a missing subfloor each take the house out of the mortgage market. An appraiser will note the condition, and a conventional or FHA lender will not close on a house that is not habitable as it sits. That leaves renovation loans, which are slow and picky, and cash. A listing that waits for a renovation loan buyer can sit for months while you carry the mortgage, the insurance and a house nobody is living in. Our article on houses that do not sell covers that cycle in detail.

The permit file matters too. A renovation that stopped mid way often has an open permit with inspections never called, and the county does not close it on its own. Our open permit article explains the choices, and if the county has already written the house up, our code violations article covers the notice and the deadlines.

Finishing it versus selling it open

Finishing the job with a second contractor is the right call when the remaining work is small, you have the cash, and you can get a licensed contractor to take over another crew’s half done work, which many will not. The second estimate is usually higher than the first, because the new contractor has to inspect and sometimes redo what is already there. Selling the house open is the right call when the remaining work is large, the money is gone, or the dispute with the first contractor is still live. A cash buyer prices the house as it sits, finishes the renovation with its own crews after closing, and the contractor dispute is settled from the proceeds instead of from your savings.

How we buy a house like this

You tell us the address, what was started, and what the contractor is claiming. We look at the house in person or on video, including the open walls, and send a written offer within a day with the math shown against finishing and listing. A licensed Maryland title company orders payoffs for every lien that is actually established, holds the amount in dispute in escrow if the contractor’s case is still pending, and pays the contractor against a recorded release at settlement. Open permits are closed by our crews after closing. Two to three weeks is typical when the lien side is settled, longer when a petition is waiting on a hearing date. Our as-is page covers what we do not ask you to do, which is anything, and our judgment and IRS lien article covers the other kinds of liens the title company will find.

A contractor who walked off has already cost you time and money. Maryland law gives you more room than the lien letter suggests, the deadlines run against the contractor, and the house sells in the condition it is in. Get the dates, get the documents, get a real number for the house as it sits, and decide from there.