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Can I file a lien for construction in a strip shopping center where the franchise owner leases the space

I constructed a fast food restaurant in a strip shopping center where the franchise owner only rents and does not own the space. We completed the project 12/27/2019 and the franchise owner is nickel and diming both our subs and us to death Most subs have been paid a reduced amount due to the owner demanding they reduce their fees and we have not received final payment. He has demanded we reduce our price also.

3 replies

Apr 23, 2020

Mechanics liens are available on Maryland tenant improvements, to some degree. Under §9-103 of Maryland's mechanics lien statute, if the value of the property is increased by 25% or more - then a lien against the tenant's interest will be available. Meaning, the claimant will be able to place a lien against the lease held on the property. And, when significant construction was performed to build a chain restaurant expected to be profitable - that could provide a lot of leverage. Often, having a lien filed will put the tenant in breach of their lease agreement, so they'll have no choice but to resolve the payment dispute or face serious trouble with their landlord. Levelset discusses mechanics liens on tenant improvements in great detail here: What Happens to Mechanics Lien Rights If My Project is a Tenant Improvement?

Maryland's mechanics lien deadline

Before deciding how to proceed, it's crucial to keep the mechanics lien deadline in mind. Maryland mechanics liens must be filed within 180 days of last furnishing labor or materials to the job. However, unlike some other states, establishing a Maryland lien will take some time. Filing a mechanics lien in Maryland means filing a lawsuit - and an action must be filed in a court of the county where the property is located. So, before that deadline comes too close, it's smart to consult with a Maryland construction attorney who could help with that filing.

Other payment recovery tools can force payment without a lien filing

Before deciding to opt for a mechanics lien filing, there are some other steps that can be taken to help force payment. Though - the deadline to lien is harsh, so it'd be a bad idea to delay a lien filing too long if it'd put the deadline in jeopardy. Still, sending a payment demand letter or a Notice of Intent to Lien could be useful for showing the customer you won't be pushed around and that you're willing to do what it takes to get paid. Further, sending those documents to both the customer and their landlord could be useful, too - a landlord might be able to put additional pressure on the tenant to pay what's owed to avoid a dispute involving the property and its rights. Obviously, though, a mechanics lien filing can't always be avoided. So, for more help with that, these resources will be useful: (1) Maryland Mechanics Lien Guide and FAQs; and (2) How to File a Mechanics Lien in Maryland – Step by Step Walkthrough.

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Apr 23, 2020

You may file a lien against the leasehold interest, assuming you improved the tenant's portion by more than 25% of its value (meaning, the 'building' at issue is the tenant's unit, not the entire mall or strip plaza - and while its hard to quantify its value, a full retrofit will usually more than cover the requisite improvement value for mechanic's lien purposes). And while it may not sound as sexy as foreclosing on the entire mall through the mechanic's lien, ultimately, if brought to its end result with a final lien placed on the tenancy, its purchaser will end up owning the lease interest and, consequently, the fast food restaurant. Note, final foreclosure of a mechanic's lien is probably a breach of both the operator's franchise agreement and lease agreement - further reasons why a mechanic's lien on a tenancy interest is, in fact, a powerful remedy that can lead to a quick pre-trial settlement.

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Aug 23, 2023

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