Maryland Legal Alert for Financial Services

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Lien Priority Concerns: Real Property Lenders Beware

Real estate lenders in Maryland now have more reasons to ensure that the search of land records is complete and that they are protected from all potential prior liens.  In our September 2016 Maryland Legal Alert, we reported on a recent decision by the Court of Special Appeals of Maryland that raises concerns for lenders making real estate-secured loans.  Under the facts of the case, a property developer filed a declaration of deferred water and sewer charges in favor of a private utility company that would construct the water and sewer infrastructure connecting the proposed residential development to public utilities.  The declaration provided that owners of properties within the development were obligated to pay annual water and sewer charges to the named utility, and that a lien was created in favor of the private utility.  The Court of Special Appeals determined the lien in the declaration had priority over a later recorded homeowner's refinance deed of trust, even though there was no compliance with the Maryland Contract Lien Act.  Please review the in-depth article in our Real Estate Practice Group's September 2016 Relating to Real Estate publication, which discusses this decision and its legal implications.  We have been informed that a petition for certiorari will be filed this month asking the Court of Appeals of Maryland to review this decision. 

Please contact Edward LevinWilliam Shaughnessy or Marjorie Corwin with any questions concerning the impact of this decision.