Are Mechanic’s Liens the Be All End All of Construction Collections?

For those of you familiar with Construction Law Musings, you are aware of my affinity and discussion of those powerful but tricky collection tools: mechanic’s liens.  You have heard me tout their ability to secure payment when a contractor or subcontractor has not been paid on a construction project (even in the face of bankruptcy).  If you read my construction law blog regularly (though recently not-so-regularly updated), you could get the impression that a mechanic’s lien is an automatic avenue to payment.

While mechanic’s liens can be a powerful collection tool, this post is going to discuss some pros and cons of recording, and ultimately suing to enforce, a mechanic’s lien in Virginia.

First the good news.  Mechanic’s liens work well because:

1. They provide a priority lien that takes precedence (in order of recording and with a couple of minor exceptions) over all existing liens except for a purchase money deed of trust.
2. They let an owner of a project know that a lower-tier contractor has not been paid.
3. They hold up financing and further payment both two and from an owner, thus causing issues until the lien is resolved
4. They can and often will induce one of the parties to the construction project to bond the lien, thus assuring payment of a successful claim.
5. As stated above, mechanic’s liens in Virginia survive bankruptcy where other types of claims may not.

The above are only a few of the advantages of a lien.  There are others, depending on your particular payment situation and construction project.  And now for the “brake pedal” considerations on your race to record:

1. A mechanic’s lien enforcement suit must be filed in Virginia Circuit Court with the attendant additional expense so consider the size of your claim to avoid unnecessary litigation expense.
2. The Virginia mechanic’s lien statute provides numerous requirements, any of which can derail a mechanic’s lien and render that lien unenforceable.
3. On residential property-related liens, those that often are for renovation of a property, the priority exception for a purchase deed of trust, and the fact that homeowners may or may not try to sell within the 6-month enforcement window makes liens less effective.
4. Finally, just because you don’t record and enforce a lien does not mean you are without a claim.  A lien claim is almost universally coupled with a breach of contract claim.  You can review my series on the “anatomy of a construction dispute” to get a flavor of some of the other collection avenues.

The above considerations are not meant to push you into or away from the recording and enforcement of a mechanic’s lien.  They are meant to get you to think it through, preferably with the advice of an experienced Virginia construction attorney, before making a call.

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