A couple of weeks ago, I discussed what steps you, as an owner of a construction project in Virginia, could take should you receive a mechanic’s lien notice after a project was complete. However, this is not the only time such a lien may be recorded. Particularly on a commercial construction project that spans months, there are suppliers or other subcontractors on your project (as either a general contractor or owner) that provide materials or labor at a point in the project where their 90 day window for recording the lien may expire before project completion.
In this situation, you may be faced with a mechanic’s lien recorded on your property that potentially holds up financing or otherwise causes problems at your project. While many of the same defenses could apply in this situation that I discussed in my prior post (payment defense, 150 day rule, etc.). After ceasing all payments to the general contractor as of the date of receipt of the notice of lien, there are a few other issues/actions that you should consider when faced with a mid-project mechanic’s lien notice.
The first of these is what your contract with the general contractor (or subcontractor in the case of a general contractor) says regarding what the general contractor must do in this situation. If the lien is recorded by the general contractor, you should re-examine whether the general contractor waived its mechanic’s lien rights through its contract (remember, the recent change disallowing such waivers does not apply to general contractors). If this is the case, hopefully the general contractor will simply release the lien and if not then you can take advantage of the court process to force removal.
Your contract could also require the general contractor to take care of the lien in the instance that the lien is recorded by a subcontractor or supplier. This usually means assuring release of any lien within a certain time. This could be through the provision of a bond in the place of the lien so that the lien is released through the procedure found in Virginia Code Sec. 8.01-71 or by the forcing release of the lien through other means. Should the general contractor refuse to take such action, particularly in the face of a contractual requirement, you as owner can take advantage of the bonding process and move forward with the project if that is the financially prudent thing to do under the circumstances.
I cannot emphasize enough that should you get a notice of lien and still hold money relating to the project do not pay that money out. The payment defense only applies to money paid prior to the receipt of notice. An owner or general contractor will potentially have to pay the same money twice for any money paid out post-receipt of the notice. It is this stoppage of the flow of money that provides a mid-project lien its power for a subcontractor that remains unpaid for its work.
Of course, each set of facts presents its own wrinkles and you should therefore consult with experienced construction counsel to explore the best avenues for dealing with these mid-project mechanic’s liens.
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What kind of legal advise would give to my situation:
I lost my home due to Hurricane Sandy. I obtained a NJ construction grant with strict guidelines and together with flood insurance claim funds and my own savings, I built a house.
Towards the end of the construction defects, substitutions of materials, and alterations to the architectural plans were exposed, without any notices from the builder, this created ongoing disputes. I warned the builder in writing do not obtain the certificate of occupancy until all the corrections and construction was 100% completed. The builder ignored many warnings and obtain the certificate of occupancy. On the same day of the C/O, I immediately filed a complaint with the local building department, they ignored my complaint. Then I went to the Building Code Official, this process took 5 months to work my way up ladder of the municipality. But the code official agreed to re inspect the areas in question and I received the first violation after the C/O for stair headroom and stairs not meeting code. Then the same code official failed to enforce the headroom code, I filed a compliant to the NJ Regulatory Affairs. They came to re inspect the house, they found 2 additional code violations for 1) plumbing exposed to freeze with unfinished pipes in unconditioned soffit in unconditioned garage under the home. 2) For HVAC duct work in un conditioned attic not properly support this took place Oct 2017. So far, the builder has not been fined or has subject to any violations, he not provided proper documentation for permitting and still the local code official allows him to continue this non compliance and protects him from all complaints, stating he has not refused to repair and he his working on the amendments to the proposal. It is over a year since obtaining the C/O, it is almost one year come May 2018 the first violation was issued for the stair headroom. I cannot afford a lawyer, the constant resistance and negligence I endure by the local and state agencies, NJ legal aid will not help, and I reached out to several Sandy Help Agencies but no assistance as I have the Certificate of Occupancy which make ineligible for the assistance programs. What should I do?
I cannot give legal advice by comment, but would recommend seeing if the the NJ bar has any ideas regarding low cost legal services.
Thank you. It is now 5 years later and nothing has changed. I filed defect claim with the New Jersey New Home Warranty/ 2-10 Warranty Private Plan, this plan is mandated for all new construction in NJ. I thought the Home Warranty would have a solution to the code violations remediation and all the other defective construction and unfinished work. This defect claim turned into full arbitration walk through of my home. The arbitrator denied all coverage, claiming I withheld payment making my warranty invalid. No remedy was provided, even if the so-called outstanding payment issued was resolved, I had passed the one year coverage for defects. The code violations apparently are not covered by the warranty, the warranty claims administrator never mentioned anything about code violations being excluded, he stated incomplete construction would be excluded. He mentioned unpaid work would be excluded and asked for a list. But I told him ask the builder for the list if there was one. The builder never disclosed to the warranty company there may have been a payment issue, but I still did not understand why payment would exclude from all coverage and why the arbitrator refused to look at the paid construction defects is upsetting to date.
My financial situation has changed, and I could use good legal advice. Is there a possibility to file a claim against the warranty company? What happens when building code violations are not abated?
I am worried about the code violations….
My advice is to find a NJ construction attorney to discuss this with.