Virginia’s Interesting 150 Day Rule
In most states, a contractor only has 1 lien deadline of concern: when the lien must be filed. In Virginia, however, contractors must juggle two lien deadlines.
First, like other states, Virginia has a regular lien filing time requirement. All liens must be filed within 90 days from when labor and services were last performed by the contractor.
Unlike other states, however, Virginia has an interesting second deadline, referred to in the state as the “150 day rule.”
From the last day of work, the claimant must count backwards 150 days. Generally speaking, a contractor is not allowed to include any labor or materials supplied outside this window in its mechanics lien.
While the 150-day rule does not apply to retainage funds or sums not yet due because of a “pay when paid” clause, it usually applies otherwise, and will invalidate a lien if it includes sums due not within this 150-day window.
As mentioned in a previous post about the “payment chain” in Virginia, an arguable third deadline of concern in that state, subcontractors and suppliers in Virginia have extra motivation for filing liens immediately upon non-payment. The 150-day rule in Virginia is even further cause.
Virginia – Strongest Liens of them All?
In the past, we’ve posted about the strength and effectiveness of construction liens. Across the nation, construction or mechanics liens can be used as a powerful collections tool by contractors, suppliers and others working on construction projects.
The state of Virginia, however, has perhaps the most powerful mechanics liens in the nation.
In most circumstances, a mechanics lien will get resolved without the property being foreclosed or the property owner filing bankruptcy. However, there are occasions (and in this economy, increasingly so) when a project falls apart, and those working on the jobsite find themselves waiting for proceeds to trickle down from foreclosure or bankruptcy proceedings.
In most states, a filed mechanics lien takes priority below the construction loan bank’s mortgage. Further, the filing of bankruptcy usually defeats any lien rights.
In Virginia, however, the opposite is true. A properly filed mechanics lien in Virginia will not get defeated in bankruptcy, and it will have priority over the construction loan bank. Earlier filed mechanics liens have priority over later filed instruments.
We’ve posted in the past on why its important for contractors to lien unpaid construction projects. This review of the powerful lien laws in Virginia stands as a reminder of how effective a mechanics lien can be, and why its important to make your claim timely & properly.
Be Careful When Using Free Legal Forms
Gerard Simington with “FindAnAttorneyForMe.com” published an informative article that warns businesses about using free legal forms found on the internet.
The Internet has placed legal information and legal forms at our fingertips – and its easy to forget sometimes that the law is a very complicated subject, and legal forms are no exception. While a legal form may seem simple on its face, the blanks can carry significant legal consequences.
It’s always great to hire an attorney to draft legal documents from scratch, or to “tweak” legal forms to fit your particular need. The costs associated with legal counsel, however, are simply sometimes out of your business’ reach.
Legal Document preparation services like Express Lien are perfect for these situations. Our staffs of professionals are familiar with the forms that relate to your construction project, and we can help you draft & file your forms properly and avoid costly mistakes.
7 Habits of Contractors Who Lose Money…and How to Break Them
The Construction Commando’s “Contractor’s Secret Weapon” published an article with this title that described seven instances when contractors lose money on a project. While the article was drafted to an audience of California contractors, the habits apply nationwide.
It will be to any contractors’ benefit to review this article online, access which habits apply to you, and make an effort to avoid the costly mistakes. Any progress will help increase your bottom line.
The seven habits highlighted are:
1) The “Gentlemen’s Agreement” – A Handshake and Your Word. Bottom line: Get it in writing.
2) Using Contracts that Fall Short of the Legal Requirements.
3) Not Getting Every Change Order in Writing.
4) Failing to invoice immediately.
5) Failing to serve a preliminary 20-day notice (pre-lien construction notices)
6) Don’t Worry – They Will “Take Care of You” on the Next Job
7) It isn’t good “customer service” to record a Mechanic’s Lien
New Georgia Lien Laws Go In Effect April 2009
In the spring of 2008, a senate advisory committee in Georgia completed a report on the state’s lien laws, and proposed a bill to make certain substantive changes to OCGA 44-14-361 et seq., which houses Georgia’s lien laws.
The first paragraph of the report’s summary nicely explains the challenges facing legislatures when drafting and re-drafting lien laws:
The Lien Law Study Committee was born out of concern for homeowners coupled with respect to private enterprise. Indeed, there are frustrated and worried homeowners who have had liens filed against their real property despite the fact that these homeowners have paid in full for services rendered. Conversely, there exist disappointed, hard-working homebuilders, subcontractors and suppliers who have provided goods and services yet have received no payment.
The bill – which is described as a “fair and balanced lien law” by the Georgia Lien Rights Coalition, was passed by the Georgia legislature earlier in 2008.
The bill (Senate Bill 374) will become law in Georgia on March 31, 2009. It’s important that contractors, subcontractors, suppliers, property owners and all others affected understand the changes, as it can affect each’s lien rights.
Great summaries of the changes are provided by the Georgia Lien Rights Coalition on its site.
General Changes:
- Lien Deadlines are worded in days instead of months. So, for example, instead of requiring a lien to be filed within an ambiguous “3 months,” liens must now be filed 90 days from labor, services or materials last supplied to the property;
- Day Counting is now more consistent with Georgia law. If a deadline fills on a weekend or public holiday, it will be extended to the next business day. Previously, the deadline would be moved up to the preceding business day.
- Definitions are clarified.
Changes that Benefit Suppliers or Subcontractors
- Notice of Bond to Remove Lien: Previously, a property owner could bond out a lien without ever notifying the subcontractor or supplier. The new rules close this lophole by requiring property owners to notify lien claimants that the lien has been bonded off the property.
- Deadlines: All deadlines in the Georgia lien laws are made clearer by the new bill. Here are some important deadline changes:
- Liens must be filed within 90 days from labor, services or materials last supplied to the premises (previously 3 months);
- Notice of Lien filing must be sent to property owner within 2 business days from filing of claim of lien;
- Lien must be perfected within 365 days from w hen lien filed (previously 1 yr from labor, services or materials last supplied);
- Notice of lawsuit to perfect lien must be delivered to owner within 30 days (previously 14 days).
Changes that Benefit General Contractors and Homebuilders
- Prior law was inconsistent and confusing as to whether general contractors or homebuilders were required to receive copies of filed liens. The new law states that when a “Notice of Commencement” is filed on the project, the general / homebuilders must receive notice of the lien.
- The Lien Waiver Forms have been made more clear, with bold, capital letters explaining what the waiver means.
Changes that Benefit Property Owners
- New Notice of Contest: Owners can now send a “Notice of Contest” to contractors who file a claim of lien. The notice sets forth that the Owner contests the debt, and requires that a lawsuit to perfect the lien be filed within 60 days. If a suit is not filed within the 60 day period, the lien is invalidated.
- Expiration Date on Lien: The new rule requires that the Claim of Lien itself include a statement as to when it expires.
For more information about the revised law, you can view the Senate Bill 374 here, and you can read about hte new rules at the Georgia Lien Rights Coalition website.
Express Lien continues to monitor the lien law changes in Georgia, as it does in every state. When the new rules go into effect on March 31, 2009, the Express Lien, Inc. forms will be updated to meet the new requirements.
Our service prepares and files Claims of Lien for contractors, subcontractors and suppliers throughout the state of Georgia. We also send Notices of Lien to the interested parties, can prepare and send Notices of Contest for Georgia property owners, and prepare and file lawsuits to perfect your construction liens.
Save you company time and money, and ensure that your Georgia liens are filed professionally with Express Lien.
Why Lien?
Dear Contractor/Subcontractor/Supplier:
There are some customers or prime contractors who will not pay you after a significant amount of work, labor, services and materials have been invested into performing a job. The founder of Express Lien’s father and grandfather were both general contractors in New Orleans, LA, so we know your frustration.
The best way to collect on these non-paying accounts is to begin collecting quickly and thereby motiving the debtor to resolve your claim.
Mechanic’s liens – the documents created and filed by Express Lien – are inexpensive and hard-hitting. These filings put restrictions on the job-site property, they entangle the owner with your dispute, they can freeze public funding, and more.
You may be pressured to hold-off on filing your lien and beginning the process of collecting on your account receivable. Homeowners may attempt to postpone payment by promising future funding, and many general contractors – perhaps pointing to a “pay when paid” clause – may promise payment once it gets paid on the job.
These “hold ups” on payment – even when legitimate or well-reasoned – will not suspend the short and strict time period you have to file your lien. If you wait too long, you may lose your right to file a lien – and that means you lose the ability to inexpensivly take this important step in collecting on an account receivable and in preserving your rights against all parties funding the project.
Filing a lien will stake your claim. If you were hired by the Owner, it will restrict the owner’s ability to abandon, sell or otherwise transfer the property. If you were hired by the Contractor, a filed lien gives you the right to not only seek payment from the Contractor, but also from the Owner, thereby increasing your chances of getting paid.
Not only is the founder of Express Lien the son and grandson of general contractors, but he is also a successful construction attorney licensed to practice law in both Louisiana and Washington. Scott Wolfe, Jr. was named as a Top 50 New Orleans Attorney in 2006 and 2007.
Express Lien makes filing a mechanic’s lien fast and easy, and we have the experience and knowledge to help you get paid on a non-paying construction job.
“No Liens” Clauses – Are They Valid?
It is ordinary for a subcontractor or supplier to execute a lien waiver after it receives payment for services and/or materials. Construction contracts, however, sometimes go one step further by requiring a subcontractor or supplier to waive its lien rights as a condition of accepting the contract.
There is some question in Louisiana jurisprudence as to whether these provisions are enforceable or unenforceable.
The 2004 5th Circuit Court of Appeals case that muddied the water on this issue was captioned Shaw Constructors v. ICF Kaiser Engineers, Inc. In deciding whether a pre-work lien wavier would be valid, the court turned to Louisiana jurisprudence on the requirements for a valid waiver in general.
Generally speaking, a “waiver” in Louisiana occurs only when there is “an existing right, a knowledge of its existence and an actual intention to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished.” Steptore v. Masco Constr. Co., Inc., 643 So.2d 1213, 1216 (La. 1994).
In Shaw Constructors, the court reasoned that when the subcontract at issue was formed, Shaw had no known existing legal right to file a claim or lien against the property because no work had been performed. Without an “existing right” to file the lien, there could not be a waiver of that right.
The Court also attacked the pre-work lien waiver from a different angle, by reasoning that the defendants had an obligation to pay Shaw under the contract wherein Shaw waived its lien rights. By not paying its subcontractor, it failed to perform on an obligation of the contract, thereby giving Shaw the right to dissolve the contract entirely. The dissolution of the contract would, according to the 5th Circuit, also dissolve the lien waiver.
The 5th Circuit Court of Appeals therefore held that the lien waiver provision could not be enforced against Shaw.
This ruling should not affect the enforceability of lien waivers executed by subcontractors or suppliers after work is performed.
In contrast to pre-work waivers, post-work waivers occur after the right to lien has vested with the subcontractor/supplier. As a result, the subcontractor or supplier has an actual right to waive, and the waiver would likely be valid.
Furthermore, it is worthwhile to note that while the Shaw decision weighs heavily against “no liens” clauses in contracts, it’s not necessarily the final word on the issue.
First, Shaw was decided by the Federal 5th Circuit and not by a Louisiana court. In its decision, the 5th Circuit simply attempts to “predict” what a state court would do if faced with the same legal question. If and when the “no liens” clause issue gets to the state courts, there might be a different outcome.
Second, the Shaw court hints that circumstances might exist when it would uphold a “no liens” clause. In its comparison of the Louisiana Private Works Act to the similar statutes in Illinois, the court highlights that subcontractors and suppliers in Louisiana can lien a project even when there is no breach in the contract. If a sub or supplier finds itself in this situation, and his claim rights were vested at the time of signing the contract, it is possible that the “no liens” clause would be enforced against it.
For all intents and purposes, however, the Shaw decision places great restraints on “no liens” clauses in contracts.
Generals may want to explore other methods of protecting jobs against liens, and will specifically want to get post-work lien waivers from the subs and supplier regardless of whether they have a pre-work lien waiver.
On the other hand, subs and suppliers should discuss their lien rights with an attorney before the expiration of their claim period even if they signed a contract with a “no liens” clause.
What Subs Should Know about Liens
While subcontractors often feel that they are at the bottom of the construction world’s food chain, nearly every state protects them against non-payment with powerful lien laws. To utilize the force of these laws, however, its imperative to understand their scope and requirements.
In Louisiana, the Private Works Act allows a subcontractor to lien a project to ensure prompt payment from both general contractors and property owners. While the actual filing of a lien is important, it’s only the first step and it alone may not result in payment.
There is really no way to “enforce” a lien. A lien is simply a way for the contractor or subcontractor to protect its rights for payment. The step itself, however, is very important. Filing a lien formally notifies the property owner that the general contractor is not timely paying its laborers, and more importantly, that legal action can be commenced against them if a payment is not timely received.
Accordingly, if a subcontractor does not timely file a lien on a project, it cannot later seek payment from the owner of the property for the unpaid work. However, if a lien is timely filed, not only can the subcontractor bring suit against the general, but it may also sue the property owner directly. The lien, in other words, puts all parties on notice that there is unpaid work.
The significance of knowing and following lien laws is it will help your company to be more efficient in the collection of payment on projects. Lien laws are very technical and strict in Louisiana. The Private Works Act requires liens to be in writing, signed by the person asserting the claim, reasonable as to the amount owed with the amount itemized as best as possible. The lien must include a legal property description and description of work completed, and filed with the clerk of court or recorder of mortgages in the parish where the property is located.
While the Lien Laws are crafted to strongly favor subcontractors in a construction project, they do require careful attention to detail. It is very important to file the lien within the appropriate amount of time, which, depending on the project, is either thirty or sixty days, and to follow-up after filing.
When used correctly, liens are a powerful tool for subcontractors, and properly filed liens will ensure that those parties controlling the money do not abuse those who are working hardest on the projects.
