Mechanicís Lien law gives those that have worked on improving property or furnishing materials for non-governmental property improvements a special status in order to ensure payment and to encourage credit for construction of new projects. The law in some form has existed in Virginia since the 1790s. Mechanicís Lien law is founded on the theory that those who improve real estate should be paid for the fruits of their labor which can be seen by all and the benefits enjoyed by the owner. The unpaid contractor or material supplier is called the Claimant. To protect its rights in the building or project the Claimant must file a Mechanic's Lien in the Circuit Court of the city or county in which the project is being constructed.
Like most rights, a Mechanic's Lien must be placed on property carefully, and within certain time frames or it will be lost. In order to have lien rights on residential property, a pre-notice must be given if a Mechanic's Lien Agent is listed on the posted building permit. On commercial, non-residential property no pre-notice is required, but the time limitations for filing must be strictly met. Contractors who perform work on a project must include their contractorís license number (which is for the same entity which contracted to perform the work) on the Mechanicís Lien for it to be valid. Material suppliers who perform no labor are exempt from this requirement. Most Virginia Mechanicís Liens are filed on commercial projects.
A general rule of thumb is that Claimant must act within 90 days of the last day of the month in which work was last performed or materials were last furnished. Another good rule of thumb is to consult and retain an attorney within 60 days and no later than 70 days of the last day of the month in which work or materials were provided, which are unpaid. Liens cannot be put together overnight as they require proper description of the property benefitted, correct names of the owner and the lessee and the proper names of the contracting tier entities. The 90 day period to file a lien runs from the last day of the month in which the last work was performed or last material delivered to comply with the contract. The contract can be written, oral or presumed by performance of work or supply. Warranty work does not extend the running of the 90 days nor does intentionally not performing a small part of the contract to extend the period (unclean hands). Since the Mechanicís Lien law is in derogation of the common law the time deadlines are mandatory and will result in loss of lien rights if not strictly complied with.
Another timing factor is that the lien cannot include work or materials furnished over 150 days prior to the last work/material date (a different point from the lien filing trigger date) if work continues despite being unpaid. Doing so will void the entire Mechanic's Lien. The last timing factor to be concerned about in Mechanic's Lien filings is that it must be filed prior to the time that the defaulting party or a higher tier contractor is fully paid in the construction requisition process. Virginia is not a Trust-theory state. This means that if the money claimed by the Lien is greater than the amount owed in the chain to any of the contractors higher in the chain prior to the filing of the lien, it will be ineffective to lien sufficient funds to achieve payment. Unfortunately, if any of the higher-tier contractors in the chain have been paid in full it will cut off the lien rights of the unpaid Claimant.
Once the Mechanic's Lien is validly filed in the city or county where the property is located, the equivalent of an 800 lb. gorilla has attached itself to the construction process. Future draws, refinances and sales will not be able to proceed until the Mechanic's Lien has been resolved and released. This should result in payment to you for the work performed or for materials furnished.
As a general rule, if the Mechanic's Lien is not resolved within 6 months, one has to file suit in the Circuit Court where it is recorded to enforce it against the property. If the successful lienor is not ultimately paid, one can prosecute the suit to judgment and force the sale of the property benefitted to receive payment. The bottom line is that to receive payment through the valuable right of a Mechanic's Lien, one must ACT within certain time lines or that valuable right will be lost.
© 2015 Eugene W. Shannon, PLC