December 17, 2020
A mechanic’s lien is a security interest in a piece of property whose owner agreed to have improvements and or other work completed on the property. Depending on the jurisdiction, contractors, subcontractors, or suppliers can seek mechanic’s liens when a customer fails to pay for the work performed and materials provided to improve the property. The lien’s effect is that it encumbers the property so that it becomes hard to resell or refinance due to a cloud on the title.
Fortunately, mechanic’s liens can be avoided by requesting that your service provider sign a lien waiver that indicates that they have been paid in full, for either a portion of the project or the entire project, and waives the associated lien rights. Additionally, all receipts and documents regarding services and goods provided should be kept for future reference and proof of payment.
A mechanic’s lien can be filed against both commercial and residential projects. When a contractor or subcontractor files a mechanic’s lien in Virginia, there must be strict compliance with the laws surrounding mechanics’ liens; otherwise, the lien will be invalid.
In Virginia, any party who performs labor or furnished materials for construction, including repair and improvement of any building permanently placed on land is entitled to lien rights where the value of the work or materials is $150.00 or more. In order to file a mechanic’s lien, the general contractor or any subcontractors must maintain a Virginia contractor’s license.
When the project includes residential buildings, potential claimants must first provide a preliminary notice to a mechanic’s lien agent if one is designated. This notice should be provided within 30 days of the date on which the claimant began work or furnished materials for the project. The notice must include the (i) name, number, and address of the company sending the notice, (ii) the contractor’s license number, issuance date, and expiration date, (iii) the building permit number, (iv) a description of the property that matches the description on the permit, and (v) a statement that the company that is filing the notice is attempting to obtain payment for work and materials.
A Memorandum of Mechanic’s Lien must be filed within 90 days from the last day of the month the claimant filing the lien performed labor or supplied materials on the project. Additionally, the lien can only include costs of materials furnished and labor performed during the 150 days prior the last day of work. Any dollar amount included in the lien that falls outside this 150-day window will render the lien invalid.
A Memorandum of Mechanic’s Lien must be filed in the land records of the county in which the property is located. This recordation provides legal documentation that a creditor, or in this case, a contractor, has the right to seize property due to lack of payment by the property owner. The Complaint to Enforce Mechanic’s Lien must then be filed within six months from the recordation date.
When it comes to which creditor is paid first should the home be foreclosed on, the mechanic’s lien in Virginia has higher priority than most other liens. The lien will survive most foreclosures and sale of the property.
Defense of Payment
“Defense of payment” is an affirmative defense that protects the property owner from a subcontractor’s mechanic’s lien when the general contractor, which has been paid, does not in turn pay its subcontractor. This rule makes practical sense, as the owner of a property is only required to pay for the project once.
Like Virginia, D.C. requires strict compliance with the laws regarding mechanics’ liens. However, unlike/ Virginia, D.C. explicitly states that mechanics’ liens are restricted to general contractors and subcontractors. Sub-subcontractors and more remote subcontractors or suppliers are not entitled to the security interest created by filing a mechanic’s lien.
Unlike Virginia, Washington D.C. does not require a preliminary notice to be filed. D.C.’s civil code provides that a Notice of Mechanic’s Lien must be filed within 90 days after the completion or termination of a project, whichever is earlier. While the claimant has a right to a mechanic’s lien once work has begun on a project or materials are furnished, the interest is not perfected until the claimant files the notice. The notice must also comply with all requirements in DC Code Section 40-301.02.
To enforce a mechanic’s lien, the contractor must file a lawsuit within 180 days after the Notice of Mechanic’s Lien is filed in land records. Additionally, the contractor must file a notice with the land records that a lawsuit is pending. This notice must be filed within 10 days of filing the lawsuit.
Where a property owner can show that the general contractor was paid in full, the “defense of payment” applies. Any subcontractor lien will fail if the owner has paid the general contractor.
Generally, a mechanic’s lien in D.C. will take priority over any other lien or mortgage that attaches to the property after work has begun. In the case of a foreclosure sale due to failure to pay an inferior lien or mortgage, the purchaser will take the property subject to the mechanic’s lien.
Mechanics’ liens can involve complexities, and the time limits involved can be difficult to understand, especially where there are multiple subcontractors in addition to general contractors. The experienced attorneys at McClanahan Powers, PLLC, can help you to determine your legal rights and if any liens should fail as a matter of law. Call McClanahan Powers, PLLC at 703-520-1326, or visit our website and schedule your consultation today.