lien – Construction Law Musings- Richmond, VA

A Twist on Mechanic’s Liens and Bankruptcy

Originally posted 2010-11-08 11:28:52.

We have discussed mechanic’s liens and their advantages relating to bankruptcy on several occasions here at Musings. As I warmed up from a cold weekend of camping with my son’s Boy Scout troop, I remembered a recent case out of the Fairfax County, Virginia Circuit Court that provides an explanation of yet another wrinkle in the mechanic’s lien/bankruptcy interaction.

In Heritage Contracting LLC v. Vasquez, the Court considered the effects of a filing of bankruptcy by one of two joint tenants upon the lien enforcement rights of a material supplier to the property owned by those joint tenants. In Vasquez, Chopp & Company recorded its lien against the property 5 months prior to one of two joint tenants with the right of survivorship filing bankruptcy. Once the stay was lifted 9 months after the lien was recorded (and well outside of the 6-month statute of limitations for filing suit to enforce the lien), Chopp attempted to enforce its lien. While this, in and of itself, is relatively straightforward, Chopp did not file within the 30 days post-bankruptcy required by the bankruptcy code.

Despite this failure to meet the bankruptcy code deadline, Chopp argued that, because one of the two joint tenants did not file for bankruptcy, it was still allowed to enforce its lien. The Court disagreed. After an analysis of the various cases relating to severance of joint tenancies and the Fourth Circuit‘s “unusual circumstances” test (found in A. H. Robins v. Piccinin, 788 F.2d 994 (4th Cir. 1986)), the Court concluded that Chopp had blown its opportunity to enforce its lien when it failed to file the enforcement action within the 30 days.

In short, the cautionary tale of this case is that, despite mechanic’s liens surviving bankruptcy, several statutes (state and federal) are at play in every bankruptcy. Contractors and subcontractors that file these liens need to be aware of these interactions themselves or consult with an experienced construction attorney who is. Failing to do so could send your Virginia mechanic’s lien to the “dismissed” pile in a hurry.

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Mechanic’s Liens and Legislative Sausage

Originally posted 2016-12-19 10:00:35.

English: Virginia state capitol in Richmond. F... — Image via Wikipedia

Over the past week or two I’ve been covering HB 1265, a bill that was working its way through the Virginia General Assembly legislative sausage making process. I gave you my thoughts on the original bill as written and then on the somewhat better (though far from perfect) amended bill.

Well, this past Monday I had the opportunity to take part in the hearing on the bill before the Virginia Senate committee that was considering whether to recommend the amended bill to the entire Senate for a vote.

Continue reading Mechanic’s Liens and Legislative Sausage

Virginia Mechanic’s Liens- Defense Options

Originally posted 2015-08-24 09:00:15.

Here at Construction Law Musings, I have discussed the filing of mechanic’s liens in Virginia and various cases discussing the pitfalls to be found in the filing of these powerful collection tools. However, I have rarely discussed the affirmative steps that an owner can take in defending against the filing of a mechanic’s lien by a contractor, subcontractor or supplier who provided materials and labor to its project.

Aside from the obvious defenses involving the 90 day filing term, the 150 day “look back” period, and the 6 month statute of limitations for filing suit to enforce a lien, the Virginia mechanic’s lien statute contains numerous provisions that could help an owner faced with a lien. Among them are the following:

1. If the project is for residential construction, check to make sure that the contractor or subcontractor has properly notified any mechanic’s lien agent found on the building permit. (Section 43-4.01)

2. As a defense to the priority of a mechanic’s lien filed by a contractor that refuses or is unable to complete construction, Section 43-16 places any payment by the owner made to complete the structure takes priority over the lien.

3. 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.

These are only a few of the tools that an owner or upstream contractor can use when faced with a mechanic’s lien in Virginia. As an owner of a construction project in Virginia, please make sure you discuss your options with an experienced Virginia construction lawyer to assure that you use the proper tool for the job.

As always, I welcome and encourage your comments below, please share your thoughts. Also, please subscribe to keep up with the latest Construction Law Musings.

A Lien Change for the Better (Guest Post at ZLien)

Originally posted 2017-04-10 11:00:41.

During the recent General Assembly session, the Virginia legislature made a great change to the Virginia mechanic’s lien statute. I blog about it at the Zlien Blog.

Here’s an excerpt of my post.

The recent changes to Va. Code §43-3 (effective July 1, 2012) clarify several points regarding the allocation of lien amounts to individual lots. The main points of clarification are as follows:

Common areas are explicitly excluded from the “denominator” of the lien allocation equation. In other words, where there are 10 home sites and one common area, a site or utility contractor no longer needs to worry if it should allocate part of its lien amount to the common area and can safely allocate the amount owed to the ten home sites.

Traffic signalization, and installation of electric, gas, cable, or other utilities are explicitly included in the definition of “site development improvements

Any payments to the contractor for which the owner/developer does not designate a particular lot will apply to any previously sold lot and the remaining lots will continue to bear their share of the liability.

Check out the entire post and thanks to Scott Wolfe for giving me the opportunity, yet again, to post at his great mechanic’s lien resource.

As always, I welcome and encourage your comments below, please share your thoughts. Also, please subscribe to keep up with the latest Construction Law Musings.

More thoughts on Virginia Mechanic’s Liens

Originally posted 2010-04-30 09:00:16.

As we settled yet another construction case on the courthouse steps today, I began to think about what I should post to begin 2009. Of course, given the construction industry slowdown that is predicted, and the trend at construction projects around the Commonwealth of Virginia that looks to me as if payments will be harder to come by from Owners less willing, for financial reasons, to work with contractors, mechanic’s liens will be more useful, and necessary, now than ever.

Virginia mechanic’s liens are unusually strong because your memorandum of lien takes priority over all prior liens on the property that you have improved (including from the bank that is financing the project) except in very limited circumstances. What this means is that, should you properly file and sue to enforce your lien, you get to foreclose and have first crack at any money. By contrast, a judgment lien takes priority only over liens filed after the lien is recorded.

As I stated in my primer on Virginia mechanic’s lien law in an earlier post, filing a mechanic’s lien in Virginia is a picky business. You need to be sure that you meet your time limits, include the correct information in your memorandum, and assure that you do not lien for a penny more than that to which you are entitled.

Failing to do any of these things can, and will, cause you to lose your lien, killing any advantage that you could have gained by filing the lien and leaving you with run of the mill contract rights (I will be writing on basic do’s and dont’s for construction contracts in a later post). While a breach of contract suit is a viable option, a mechanic’s lien gives you leverage that a mere lawsuit will not.

Scott Wolfe at the Construction Lien Blog has posted several short items on Virginia Lien Law that are worth checking out. However, while these posts are accurate and give the basics of lien law in Virginia, please hire an attorney (whether it’s me or another experienced construction lawyer) to help you file a lien and enforce it in Virginia because of the pitfalls that can occur from the slightest mistake.

Please also check out my links for other construction resources.

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