Originally posted 2020-12-07 10:29:33.
As any reader of this construction law blog knows, mechanic’s liens make up much of the discussion here at Construction Law Musings. A recent case out of Fairfax County, Virginia examined the question of whether contractual privity between the general contractor and owner of the property at issue is necessary. As a reminder, in most situations, for a contract claim to be made, the claimant has to have a direct contract (privity) with the entity it sues. Further, for a subcontractor to have a valid mechanic’s lien it would have to have privity with the general contractor or with the Owner.
The Fairfax case, The Barber of Seville, Inc. v. Bironco, Inc., examined the question of whether contractual privity is necessary between the general contractor and the Owner. In Bironco, the claimant, Bironco, performed certain improvements for a barbershop pursuant to a contract executed by the two owners of the Plaintiff. We wouldn’t have the case here at Musings if Bironco had been paid in full. Bironco then recorded a lien against the leasehold interest of The Barber of Seville, Inc., the entity holding the lease. The Plaintiff filed an action seeking to have the lien declared invalid because Brionco had privity of contract with the individuals that executed the contract, but not directly with the corporate entity.
After reviewing the requirements for a valid mechanic’s lien in Virginia, including Va. Code 43-3 and the legal requirements for privity relating to subcontractors stated above, the Court rejected the argument by the Plaintiff. The Court first found that Bironco was not a subcontractor, but was in fact a general contractor under the lien statutes because it had a direct contract with the owners. After doing so and pointing out that Va. Code 43-3 does not have any privity requirement, the Court went on to specifically reject the privity argument with the following observation:
This argument lacks merit because Virginia Code § 43-3 does not articulate a privity requirement. If such were the case, corporate entities could evade paying for services by having their agents enter written work contracts on their behalf.
In short, where a general contractor performs work that improves an owners’ property, the Court would not allow an owner to avoid the possibility of a mechanic’s lien simply because it had its agents execute the underlying contract with the contractor.
The result in this case makes sense because mechanic’s liens in Virginia, while statutory and very picky, are there to assure payment to contractors that improve an owner’s property and to avoid situations in which the owner gets the benefit of that work without payment. If privity were required in a situation that the Virginia General Assembly failed to require it, these dual goals could be thwarted by a savvy owner.
As always, I recommend that you read the case and draw your own conclusions and that you consult with an experienced Virginia construction attorney prior to recording a mechanic’s lien in Virginia.
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