Mechanic’s Liens – Construction Law Musings- Richmond, VA

Bankruptcy and the Virginia Mechanic’s Lien

Originally posted 2015-04-06 09:00:30.

: Image via Wikipedia

Unfortunately, developer bankruptcies are very much in the news these days. This news, while unsurprising in today’s economy and given the housing issues that hit last year, can give heartburn to those contractors that perform the site work, pave the roads, and of course build the houses at these developments. Like Musings has discussed before, bankruptcy of an owner or developer is a real possibility for which contractors and subcontractors must prepare.

However, contractors in Virginia may have a silver lining for the bankruptcy cloud. Virginia mechanic’s liens, being creatures of statute, survive bankruptcy and remain in force even after the owner of the property files for bankruptcy. Even more importantly, the 6 month statute of limitations on filing a case to enforce your mechanic’s lien stops running as of the date that bankruptcy is filed.

Even more importantly, aside from certain specific situations, mechanic’s liens in Virginia gain priority over all other secured liens.

In short, in today’s climate, contractors should not feel that they are completely helpless in the bankruptcy fight. Filing a mechanic’s lien after consultation with an experienced attorney can put a contractor or subcontractor in as good a position as possible should he owner of a project file for bankruptcy.

Please comment below, or subscribe to Musings if you find this of interest.

Back Posting with Thoughts on Lien Waivers

Originally posted 2015-05-18 09:00:46.

The seals of the Commonwealth of Virginia (Photo credit: Wikipedia)

After a week of being unable to post due to the rigors of my solo construction practice, I’m back on the blogging train. For those of you that missed my new musings this past week, I hope that you had a chance to look through some of the past Guest Post Friday posts for some good stuff to read.

During the course of my busy week last week, a question came up regarding the mechanic’s lien waivers that commercial construction companies routinely execute as part of the payment process. The waiver forms vary, but each essentially states that in exchange for payment the payee, whether a subcontractor or supplier (or even general contractor) waives its future rights to record a mechanic’s lien for the work that is covered by the payment received. Most if not all of these forms further require a certification that the funds paid will either be used to pay suppliers or that suppliers have already been paid. This general description is not the reason for this post.

Continue reading Back Posting with Thoughts on Lien Waivers

Mechanic’s Liens- Big Exception

Originally posted 2012-11-12 09:00:03.

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.

As always, please comment below and/or subscribe to receive updates on this and other topics here at Musings.

Do We Really Want Courts Deciding if Our Construction Contracts are Fair?

Originally posted 2015-03-17 10:06:56.

Virginia General Assembly (Photo credit: Wikipedia)

As I posted recently, the Virginia General Assembly has passed, and I can see no reason why the governor won’t sign, a bill that would essentially invalidate preemptive contractual waivers of lien rights as they relate to subcontractors and material suppliers. It does not apply to General Contractors, but it is a step in what many (including those attorneys that represent subcontractors and suppliers) believe is the right direction.

Of course, as soon as I posted last week, my friend and colleague Scott Wolfe (@scottwolfejr) commented on that post and then gave his two cents worth at his Zlien blog. The gist of the comments here at Musings and the post over at his blog was essentially that these contractual provisions were inherently unfair and therefore should be abolished because of both a relative disparity in leverage between the Owner or GC and the Subcontractor when it comes to negotiations and the fact that subcontractors often don’t read their contracts or discuss them with a construction attorney prior to signing them. I hear this first of his arguments often when I am reviewing a contract after the fact and a client or potential client acts surprised that a provision will be enforced and the courts of the Commonwealth of Virginia will actually enforce them. As to Scott’s second reason, I have always warned here at Musings that you should read your contracts carefully because they will be the law of your business relationship in the future.

Continue reading Do We Really Want Courts Deciding if Our Construction Contracts are Fair?

Be Sure to Bring Up Any Mechanic’s Lien Defenses Early and Often

As those of you who regularly read Musings are aware, mechanic’s liens are a big part of my law practice and a big issue here at this construction law blog. I’ve discussed the picky requirements of the mechanic’s lien statutes in Virginia and how the 90 and 150-day rules are strictly enforced. However, a recent case out of the City of Norfolk Virginia Circuit Court cautions that while failure to meet these strict requirements may invalidate a lien, it only does so if the owner or general contractor seeking to invalidate the lien argues the invalidity and/or presents evidence of that invalidity either pretrial or during trial. Continue reading Be Sure to Bring Up Any Mechanic’s Lien Defenses Early and Often