Mechanic’s Lien Coverage Requires Underwriter Approval.

Priority

Can the Construction Loan Mortgage have initial priority over mechanics’ liens?

No. Advances made under a construction loan mortgage will be subordinate to M&M liens. 

Will initial priority as to future disbursements be retained only if certain procedures are followed?

All construction loan advances will generally be subordinate to M&M liens.

If priority is lost, can it be regained?

No.

Is there a difference between on-site and off-site work?

There are no statutory differences between on-site and off-site work.

Is priority the same for all contractors and subcontractors on the same project?

Yes. According to 10 M.R.S. § 3259, all M&M lien claimants participate pro rata.

Time Limits

What are the time periods for recording lien claims by original contractors and subcontractors?

Contractors and material suppliers that contract directly with the property owner do not have to record a lien certificate (10 M.R.S. § 3253). However, subcontractors and other claimants who did not contract with the owner must record a lien certificate within 90 days of the last day that they contributed to the project. 10 M.R.S. § 3256 extends the lien for another 90 days if the owner dies, is adjudicated bankrupt within the 120 days set aside for filing the original lien claim.

After what period of time can you waive a mechanic's liens if no suit is filed?

All lien claimants must commence a lawsuit to preserve and enforce the M&M lien within 120 days after the last labor or material were furnished.

Removing or Waiving Liens

Is there a statutory procedure for affidavits of completion or notices of completion?

There are no statutory provisions for filing affidavits or notices of completion.

Can a statutory bond terminate the mechanic's liens as an encumbrance on the title?

The owner can bond around the M&M lien claim by petitioning the court for a release of the lien and then obtaining a surety bond in the amount set forth by the court. After filing the surety bond with the court, the clerk gives the owner an attested copy of the pleadings along with a certificate. Both the attested copy and certificate are filed with the registry of deeds and thus vacates the lien. 10 M.R.S. § 3263.

Can the original, general, or subcontractors by contract or waiver agreement subordinate or waive mechanic's liens by general contractor and/or subcontractors?

Yes.

Can a bona fide purchaser or bona fide lender take free of mechanic’s liens later filed for earlier work?

A bona fide purchaser for value takes free of any lien unless the notice specified in 10 M.R.S. § 3253 or the special notice prescribed in 10 M.R.S. § 3255(2) is properly recorded in the registry of deeds.

Title Company Requirements

What are the customary requirements for issuing Loan Policies on construction loan mortgages?

A “pending disbursements” clause or comparable ALTA 32 endorsement is customary. Any request to remove the standard mechanics’ lien exception requires underwriter approval.

Is it customary to add a "pending disbursement" clause or mechanic's liens exception in the Loan Policy insuring a construction loan mortgage?

Yes. Any request to remove the standard mechanics’ lien exception requires underwriter approval.

Also subject to any bulletins relating to mechanic’s liens.