Priority of Utility Liens Decided in Favor of Mortgage Lender
Last year, in our September 2016 Maryland Legal Alert, we reported on a Maryland Court of Special Appeals decision that raised concerns for mortgage lenders.
In its decision, our intermediate appellate court held that a property developer's recorded declaration of deferred water and sewer assessments in favor of the utility constructing infrastructure for a proposed residential development constituted a lien on each of the developed properties, that the lien could be enforced under the terms of the declaration without resort to the Maryland Contract Lien Act, and that the lien created by the declaration had priority over a later recorded refinance deed of trust secured by one of the impacted properties.
That was not good news for mortgage lenders.
The case was appealed and in a decision filed on August 16, 2017, the Maryland Court of Appeals reversed the earlier decision, holding that the declaration at issue (which purported to establish a priority lien before anyone had a duty to pay an assessment) did not function as a lien from the time the declaration was recorded. Instead, the Court determined that the lien to secure payment of delinquent assessments owed under the declaration must be established and enforced as provided in the Maryland Contract Lien Act.
Thus, the refinance deed of trust, which was recorded after the declaration but before anyone took steps to comply with the Maryland Contract Lien Act, had priority. This is good news for mortgage lenders. More in-depth analysis of this case can be found on our website (search: "saddlebrook). Please contact Ed Levin if you have questions about the best course of action for mortgage lenders in light of this case.