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:
- 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.
- They let an owner of a project know that a lower-tier contractor has not been paid.
- They hold up financing and further payment both two and from an owner, thus causing issues until the lien is resolved
- 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.
- 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:
- 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.
- The Virginia mechanic’s lien statute provides numerous requirements, any of which can derail a mechanic’s lien and render that lien unenforceable.
- 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.
- 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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