Mechanic’s Lien: Automatic Payment?

This article was published in the Blue Ridge Business Journal on April 23, 2007.

Many contractors, suppliers, and owners hear and use the phrase “put a lien on property” and wrongly think that filing a mechanic’s lien provides instant relief to the party seeking to be paid. That is hardly the case, as there are few areas of the law so fraught with rules and issues that make recovery on a mechanic’s lien quite difficult.

Mechanic’s liens provide a means by which contractors and suppliers may obtain a security interest in real property they improved, and ultimately compel the sale of the property to pay for the improvements they provided. Portions of Virginia Code Title 43 govern mechanic’s liens on private projects (liens are not effective on public projects) located in Virginia. Courts strictly construe the statutes dealing with the existence and perfection of a mechanic’s lien.

Generally, a lien can be filed for the construction, removal, repair or improvement of any permanent building or structure and for rental value of equipment used. However, in a situation where a tenant orders work, a lien will not be good unless the lessor ordered or authorized the work.

The mere filing of a mechanic’s lien alone does not automatically entitle the lienor to payment, or the sale of the property. These are a number of issues that make recovering on a mechanic’s lien difficult:

• Timing: The memorandum of mechanic’s lien must be filed not later than 90 days from the last day of the month in which the claimant last performs labor or furnishes material, and in no event later than 90 days from the time the building, structure, or railroad is completed, or the work thereon otherwise terminated.
• What amounts to include: Including within the mechanic’s lien amounts not permitted by Virginia law will invalidate the entire lien. The lien cannot include sums due for labor or materials furnished more than 150 days prior to the last day on which labor was performed or material furnished to the job preceding
  the filing of such memorandum (unless those amounts are for retainage).
• Notice: Failure to provide the requisite notice to the correct persons will also invalidate the lien. Here, whether the claimant provided proper notice will depend on whether the claimant is a general contractor or subcontractor/supplier.
• Property: A lien claim may fail where the claimant liens the wrong property, or includes within the mechanic’s lien property that the claimant did not improve.