Christopher Hill Launches Great Resource for Virginia Mechanic Liens

Our friend at Construction Law Musings, Virginia construction attorney Christopher Hill, just add a really great resource to his top-notch construction law blog for those interested in construction liens.   A Mechanic’s Lien Page.

Before the lien page, Musings was already a great source of  information on Virginia lien laws.   The new page really organizes that data.

Here are a few of the articles you can find within the new section:

A Lien By Any Other Name Can Sound Just As Sweet (written by yours truly)

Q:  What can you lien?  A: What did you bring to the project?

Contracts, Liens and Notices

Enjoy.

(P.S. If you’re looking for information on Virginia’s lien scheme right here at the Construction Lien Blog, you can just check out our Virginia tag.    It even includes a post by Chris Hill).

Scott Wolfe Contributes Guest Post on Construction Law Musings

Big thank you to our friend Christopher Hill who operates the Construction Law Musings blog for allowing me to become his blog’s first three-time Guest Post Friday writer.

This morning, Musing’s published a blog post I wrote titled “A Lien By Any Other Name Can Sound Just As Sweet.”

The article provides readers with a broad overview of the lien-like remedies available to them, as they differ based upon the classes of projects.   In large part, the article explains the difference between a traditional lien (filed against the property on private projects) and a “claim” type of lien (filed against a bond on a state and federal project).

Of course, this post only skims the surface, but sometimes, it’s the basic information that is needed to help folks understand the details.   And why is it important to understand these details?   The article on Musings concludes with that answer as follows:

Regardless of what class of project you’re working on, a lien-like remedy is probably available to you in the event of non-payment. However, it’s critical to understand the different remedies available at the onset of construction, for each remedy carries different pre-lien or pre-claim requirements.

Take a look at the article by clicking him, and be sure to subscribe to Christopher’s blog which posts great information relevant to those in the construction industry.

5 Things To Know About The Miller Act

When unpaid on a private construction project, an unpaid contractor or supplier can typically file a mechanics lien against the project itself.    The lien attaches directly to the property, preventing transfers and sales, and protecting the unpaid contractor’s right to payment.

On jobs when the federal government owns the property itself, there is no legal right to lien it.   Instead, unpaid contractors or suppliers must turn to 40 U.S.C. § 3131; commonly referred to as The Miller Act.

Under the Miller Act, before any contract of more than $100,000 is awarded on a federal building or work, the prime contractor must post a bond to protect those supplying labor and/or materials to the project.  The bond is always there to protect qualifying subcontractors and suppliers from non-payment.

Here are five things you should know about the Miller Act:

• Prime Contractors: If you are the prime contractor, you cannot bring a claim under the Miller Act.   Instead, you have a contract claim against the government, and must bring a lawsuit against it.   The Miller Act deadlines are not applicable, and you should consult with an attorney to discuss your claim.

• First Tier Subcontractors and Material Suppliers: If you contracted with the prime contractor to provide labor and/or materials, you can sue the surety on the Miller Act Bond.   Suit must be brought within 1 year from the last date you provided materials or services.   A Miller Act Notice may be provided to the Owner and/or Surety.

• Second Tier Subcontractors and Material Suppliers to First Tier Subcontractors: If you contracted with a first tier subcontractor, within 90 days from the last furnishing of labor and/or materials, you must deliver a Miller Act Notice to the prime contractor.   The law has specific requirements for what must be contained in the notice, and how it must be sent.   You need not deliver it to the surety, but it may be a good idea.   Suit on the bond must be brought within 1 year from the last date you provided materials and/or services.

• Third Tier Subcontractors and Suppliers to Suppliers:   If you contracted with a second tier subcontractor, or if you are a supplier to a supplier, you do not have any rights under the Miller Act.  Instead, you must simply seek payment from the party they contracted with.

• If you aren’t paid on a project, you have a right to see the bond and the contract.   Send an affidavit to to the contracting agency confirming that you both supplied labor and/or materials to the project, and have not been paid.

How Express Lien Can Help

• Unsure if your project qualifies as a Miller Act Project?
• Confused about how to actually deliver the notice?
• Not sure who is the contracting agency for your federal project?

Express Lien is experienced in preparing and delivering Miller Act Notices on behalf of unpaid contractors and/or suppliers to qualifying federal projects.   We can research your project, find the relevant parties, and help protect your right to files suit on the Miller Act.

Express Lien charges $395.00 to research the project, prepare the Miller Act Notice, deliver it according to statute, prepare a proof of delivery, and maintain all the required documents for you in our industry-leading Lien Pilot.

If you’re interested in simply getting a copy of the bond and the contract, Express Lien will prepare and send the required request to the contracting agency for just $95.00.

Get Started Now!

The Importance of Knowing When Your Lien Period Begins

In nearly every state, the construction lien statutes require that claimants record their mechanics lien withing a certain “lien period.”    The start of the lien period has a specific beginning date, and the lien period usually extends for a period of days or months from this start date.   Mechanic liens filed outside the lien period are typically unenforceable.

Knowing when the end of the lien period arrives is important, but perhaps not as important as knowing when the lien period begins.   After all, without knowing the start date, it’ll be impossible for you to calculate the end date.

In most states, the lien period will begin upon the “completion” of the project as a whole, the “completion” of your particular scope of work, or the “last date” you furnished labor and/or materials.

While this may sound like a straight-forward requirement, it is not always so.  In many states (if not most states), labor and/or materials necessary to perform remedial, punch list items, or warranty obligations are generally not considered in establishing the completion date or the last date of providing work.  Contractors and suppliers, therefore, can theoretically have the lien period begin days, weeks or months before they are off the job.

The problem here is clear:  Sometimes, owners or other contractors hold progress payments until the warranty or punch list work is complete.    In theory, your lien period could expire before you’re ever “unpaid.”

Knowing when your lien period begins is critical.  And sometimes, to preserve your lien rights, you may find it necessary to file a lien before the project is finally complete, and before payment has become a major point of contention. (Read two articles on this issue here:   Re: California law and Re: Ohio law).

Our free Lien Pilot helps your company calculate and control lien deadlines.   Once you put in the critical date (i.e. date last labor / materials furnished), the Pilot will calculate the due date for your lien in the applicable state and on the applicable project.  However, for this calculation to be accurate, it’s important to know when that date is.

Every state’s law is different, and so you should consult the law in your state to determine exactly when your lien period begins.

Myths and Facts of Properly Serving a Mechanics Lien in South Carolina

Special thanks to Jeff Bannister of Serve-One Inc. Process Serving in Greenville, SC, who contributes this guest post to the Construction Lien Blog.  Jeff Bannister is the owner of Serve-One Inc. Processing Serving.   Serve One Attorney Services is the largest process serving company in SC.  Jeff is a Desert Storm Veteran and former State Trooper who started serving legal process in 1987. He is not an attorney.

When it comes to civil liability a Mechanics Lien is in my opinion the most dangerous paper to serve. If it is not filed and served properly, the process server could  be held responsible. That’s why it’s critical to learn to navigate through the myths and facts of how to properly serve these liens.

Myth  #1 The lien’s 90-day limit can be extended by filing with the Sheriff’s Department.

This time limit, or statute, starts the last day work was done or material was supplied to the property in question. It is true that South Carolina’s rules of civil procedure, Rule 3 paragraph (b), states a statute can be tolled on a SUMMONS AND COMPLAINT.  But Mechanics’ liens are not included in this rule.

Myth# 2 If the owner of the property can’t be found, an affidavit for non-service  can be filed.

When the owner or person in possession of the property cannot be found, S.C. Code Ann Section 29-5-90 allows the lien to be filed with an affidavit of non-service by a SHERIFF or his DEPUTY. But it’s important to note that this section does not provide for an affidavit of non-service from a private process server.

I have asked attorneys for their opinion about this. They’ve told me they would try an affidavit of non-service if there were no other choice ­– but that they wouldn’t want to be the first to present this to the court.

I have always kept track of the date, and if the 90 days were over on a weekend, I would go to the Sheriff’s Department civil division with a copy of the law in my hand and politely explain the situation.  I have never been turned down when I ask for a rush check of the property and affidavit of non-service. This affidavit of non-service MUST be filed with the lien before the 90 days.  (It does seem unusual that if the lien was served properly, the statute does not require the affidavit of service to be filed with the lien.)

Myth# 3 If the owner or registered agent cannot be found it can be posted on the front or main entrance to the property using a nail or securing it with tape.

I have done a great deal of research on this, and I have not found any “Nail and Mail” sections concerning mechanics liens in South Carolina.  S.C. Code Ann. Section 29-5-90 says a mechanic’s lien will be dissolved within 90 days unless it is served upon the owner OR if the owner cannot be found a person in possession of the property.

This would be a common practice if you were serving an apartment complex that is under construction and the owner is an out-of-state corporation. The lead project manager would probably be the most appropriate person in this case.  If it was a house or rental property the person living there would be appropriate.

The Mechanics lien is a very unusual paper when compared to other civil processes.

Often, the client will ask that you file the lien with the clerk of court or RMC office. This should be done as soon as possible because the validity and value of a lien can be effected by its timeliness. To make research easier for the attorney, record the book and page number and the time the lien is filed.

If the lien isn’t properly handled ‑‑ either by the attorney or the server — the plaintiff may have to pay all associated fees concerning the defense of the lien.  So, it is imperative everything be handled according to the details of the law.

Avvo Legal Guides on Oregon and Louisiana Liens Published

Want a step-by-step guide on how to file construction or mechanic liens in Louisiana or Oregon?   Your call has been answered this weekend with the publication of Avvo Legal Guides on both these subjects, which you can view here:

How to File a Construction Lien in Oregon

How to File a Construction Lien in Louisiana

These two legal guides offer plain english explanations on how to prepare and file a construction lien in either of these states.    After reading the guide, you can visit Express Lien’s free Lien Punchlist & Forms center, where you can download more information about on the subject, and even download free PDF-fillable lien forms.

Want to dot your i’s and cross your t’s, and rest easy knowing your document will get filed?   Consider using the Express Lien service to prepare your lien, file and serve it, and then store it online for your records.

The two above-listed legal guides were written and published by Scott Wolfe Jr., who is the founder of Express Lien and the company’s President.   Separate from Express Lien, Scott is a practicing construction attorney in Washington, Oregon and Louisiana, with his construction practice the Wolfe Law Group.

He previously published a similar legal article on Avvo.com about filing construction liens in Washington, which you can read here.

Mechanics Lien Basics

If we’ve said it once, we’ve said it a thousand times:  lien laws are a contractor or supplier’s secret weapon.   The trouble is that utilizing the law can be complex and hyper-technical.

There are a million materials out in the webosphere to help those in the construction industry better understand the lien laws in their state.   Express Lien offers some of these materials on its Lien Law Punchlist and Forms page (it’s free, by the way).

Ellen Rapport Tanowitz, a Massachusetts attorney, published a quick mechanics lien article on her Nine Points of Law Blog.  The post answers some basic (but commonly misunderstood) questions about liens and the lien process.

The author promises us a few additional articles more closely examining the Massachusetts lien law landscape, which is good reason for Massachusetts contractors, subcontractors and suppliers to keep an eye on that feed.    Take a look at the overview article referenced herein by vising the Nine Points of Law Blog.

ConstructionLawMonitor.Com: Pay When Paid Clauses and Lien Rights

Our good friends over at Wolfe Law Group (ok, it was me) have put up an article on the trials and tribulations facing subcontractors due to the use of the dreaded “Pay When Paid” clause.

See their article here and how these clauses work.  As a contractor you need to be aware of your right to payment and potential roadblocks on the way to getting paid.

One of the most important defenses to the “Pay When Paid” clause is your right to lien a project, and consequently the owner. Since the owner’s failure to pay the general contractor has caused your inability to recover payment, a lien will allow you to proceed against that party in  a legal action for payment.

Read the article to better understand your rights and the tools you can use to ensure payment. Remember that owners and surety bonds can be reached with a properly filed lien.

Contact ExpressLien.Com in order to protect your right to payment.

If A Construction Lien is Bonded…Does that Circumvent Payment to an Claimant?

Typically, a construction lien is filed to have a number of desired effects:  (1) To prevent the sale or transfer of the property; (2) To hold multiple parties without contractual privity liable for the debt; and (3) To provide contractors with a faster and more direct remedy against parties in litigation.

But if a homeowner (or other interested party) files a bond in response to the lien, does that defeat the purposes of the lien itself?

Quite simply, no.

What is a lien bond?

Most mechanic liens statutes give property owners and other interested parties in a construction project the ability to file a bond in response to a party’s filing of a mechanic’s lien.   Most states require the amount of the bond to equal more than 100% the lien claim.

In Louisiana, for example, a lien bond must be 125% the amount of a claim.   In Washington, the bond must be 150% the claim amount.

The bond itself is deposited with the recorder or clerk’s office and theoretically “takes the place” of the lien. A filed bond, therefore, usually has the effect of eliminating any barriers to the sale or transfer of property and nullifying any rights to sue parties without contractual privity.

So, if a lien can be bonded and all of the lien’s benefits nullified…what’s the point of the lien?

The Bond’s Benefits

While the lien bond acts to nullify some positive aspects of a party’s claim of lien, it does not defeat the purpose of the lien statutes.   The claimant loses some benefits of the lien itself, but it gains the benefits of the bond.

Here are some benefits of the bond:

• The entire amount in dispute (plus an additional amount – 25%, 50%, etc.) is filed with the court, and is securely awaiting determination of ownership.   This means that upon a court award, you won’t have to spend any money “collecting” the judgment.   The money is there.
• The lawsuit to foreclose or enforce your lien becomes a lot less complicated.   Sometimes, a subcontractor’s lien claim can include a handful of parties (owners, GCs, suppliers, etc.).   The more parties in litigation, the more expense and procedural hurdles.   When a lien is bonded, it reduces the litigation to a one-on-one dispute and narrows the scope (and expense) of the action.

In short, while a bonded lien does not prevent the sale or transfer of property and may reduce the number of parties a claimant can sue….the bond also eliminates the need for those remedies.  It places the entire amount in dispute (plus sum) into the reach of the claimant, and the claimant can move forward in a clean and uncomplicated procedural action to recover the funds.

If your lien is bonded, it has already succeeded to some degree (it has produced the cash).  Now, it’s only a matter of proving that the cash is yours.

Mechanics Lien – Is it like a Mortgage? Yes and No.

In most states, contractors and suppliers can file “Mechanics Liens,” whereby they acquire a privilege against the construction jobsite’s property.    The liens usually work like a mortgage on the property, such that it must be satisfied before a property is sold, transferred or refinanced.

While liens act a lot like mortgages, they certainly are not identical to mortgage instruments.

First, in most states, mechanics liens themselves expire.    Most states require that the contractor file a lawsuit to “enforce” or “foreclose” on the lien within a certain time period (sometimes short), to extend the life and effectiveness of a lien.   Here are some example timeframes:

In Louisiana, liens must be enforced within 1 year from filing.  In Washington, lien foreclosure is due within 8 months of filing.  In California, you must foreclose within just 90 days of filing!

Second, depending on the state, liens are given more or less “priority.”    Lien priority effects the order the instruments are paid in the event of a property sale or foreclosure.   In other words, if a property is foreclosed upon but sold for an amount less then the sum of all liens, and there are two mortgages and a mechanics lien on record, who gets paid and who doesn’t?

The answer to this question depends on your state.   In Louisiana and Washington, liens take a junior priority to mortgages and similar instruments.  In other states, however, the rules are or, depending on circumstances, can be different.    In Virginia, mechanics liens have priority over construction loan mortgages.   In Minnesota, depending on when the respective instruments are filed, a mechanics lien can take priority over mortgage-type instruments.