Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

Mechanic’s Liens- Big Exception

The state seal of Virginia.Image via Wikipedia

Musings has discussed mechanic’s liens on numerous occasions.

As we discussed in earlier posts, the general rule is that a mechanic’s lien jumps to the head of the line of liens when filed. This is true in most instances. In the typical case, a contractor puts up a building and, when the owner refuses payment, it files a mechanic’s lien that takes priority over all other liens on that property, including the construction loan deed of trust (or mortgage, depending on your state’s property laws).

However, in Virginia, an exception exists. The Virginia Code provides that in a case where there is a loan on the land with a deed of trust, and then a construction loan with its own security in the land, the first lien holder can enforce its lien up to the value of the original and unimproved land on which it placed its lien. The mechanic’s lien holder takes priority on any value added to the property based on any improvements (i. e. the building itself) over any other liens.

When the construction loan is secured by the same deed of trust as the purchase loan, the mechanic’s lien takes precedence. Of course, these are the general rules. Your particular situation must be examined carefully by an attorney or other professional experienced in mechanic’s liens to determine the priority of your lien.

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