As is always the case here in Virginia, our General Assembly has made some legislative changes that affect construction contracting. One of these changes is an amendment to Va. Code 43-13 found in the mechanic’s lien section of the Virginia Code.
This section of the code has always required that any money paid to a contractor must first go toward paying its subcontractors, suppliers and laborers prior to being used for any other purpose. Prior to 2020, the only remedy for violaiton of Va. Code 43-13 was to go to the local Commonwealth’s Attorney and request a prosecution of the wrongdoer. For various reasons, including that such action did not get the subcontractor or supplier that remained unpaid under this section paid, this remedy was not often pursued except in the most egrigious cases.
A key change in the statute occurred during the 2020 legislative session states as follows:
Any breach or violation of this section may give rise to a civil cause of action for a party in contract with the general contractor or subcontractor, as appropriate; however, this right does not affect a contractor’s or subcontractor’s right to withhold payment for failure to properly perform labor or furnish materials on the project. Any contract or subcontract provision that allows a contracting party to withhold funds due under one contract or subcontract for alleged claims or damages due on another contract or subcontract is void as against public policy.
What does this mean? Firstly, it means that there is now a civil cause of action directly under this statutory provision for any subcontractor or supplier that is not paid in violation of this statute. Secondly, it outlaws cross project withholding of funds as against public policy. This last makes provisions of construction contracts that allow withholding of funds on one project for alleged breaches or damages on another project void.
These two additions should be helpful to subcontractors and suppliers that face non-payment if the circumstances are right. As always, I recommend the advice of an experienced Virginia construction attorney when faced with a potential violation of Va. Code 43-13.
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