So, you own a piece of property. You decided to have some work done and after what you thought was proper due diligence, you hire a general contractor to build a great office building on the property. Your architect designs the space, you sign the construction contract for a price you find fair and that the bank approves. Construction starts and with a few minor hiccups, a couple of written changes and one minor but slightly annoying change required by the local building inspector, completes relatively on schedule. You write the final check to the general contractor for its final draw and start the process of leasing the space out. All is right with the world as best you can tell.
A month later, you walk to your mailbox and lo and behold, you have a certified mailing containing a notice that the plumbing subcontractor has recorded a mechanic’s lien on your property. After counting to 10 to let the various emotions pass, you call the general contractor to see what is going on. You’re told that there is a dispute regarding a change order about which you knew nothing and that the general contractor feels it is in the right and should not have to pay the money represented in the memorandum of lien so it won’t be paying the subcontractor unless and until it is told to do so by a court or an arbitrator.
Does this sound scary? Probably and particularly if you haven’t seen one of these in person before. But, as Douglas Adams so famously put it in one of my favorite books of all time The Hitchhiker’s Guide to the Galaxy, “Don’t Panic!” This is good advice for intergalactic hitchhikers and owners of commercial construction projects (I’ll get to residential in a separate post). Unless you need to do something with your property, for example refinance or sell it, within 6 months (or the applicable enforcement period where your project is located if you aren’t in Virginia), the lien is just a piece of paper and you can wait to see if there is an enforcement action. Even in the face of an enforcement action, you have options to defend yourself and with the help of an experienced construction attorney may very well be able to get the lien removed so you can move forward and allow the subcontractor and general contractor fight it out without you.
In the above scenario, you have a defense of payment. Va. Code Section 43-7(A) provides that a subcontractor’s lien cannot exceed the amount that you owe the general contractor. If you can prove payment in full as described above, you can get the lien released. Also, examine the lien itself to determine if it was recorded within the proper 90 day time frame and that it does not include money that would be precluded by the 150 day rule. These are just a couple of the options that you have in the face of a mechanic’s lien.
In order to bring such defenses to light in the event that such action becomes necessary, Section 43-17.1 provides a procedure for affirmatively challenging the validity of a mechanic’s lien for any of the previously mentioned reasons.
In short, as if it is not already too late for that, a mechanic’s lien notice here in Virginia is not a reason for panic. Concern? Probably. A need for investigation? Surely. Panic? Nope. Should you receive one of these on your commercial property, simply take a deep breath and explore your options.
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