In Virginia, a lien claimant may make a claim for a mechanic’s lien by completing and recording a “Memorandum for Mechanic’s Lien” document. There are separate versions of the Memorandum depending on whether the claimant is a contractor, subcontractor, or sub-subcontractor.
In general, a mechanic’s lien claim is made when a property owner or other person in the chain has not paid the contractor or others owed payment. The lien works as a security device by placing an encumbrance on the improved property, which in turn prompts the property’s owner to pay in order to remove the lien. Liens can also be sought against payment funds, for example, by preventing a contractor from being paid by the owner until the subcontractors are paid.
By a General Contractor
A general contractor must file a memorandum of lien at any time after the work is commenced or material furnished, but not later than 90 days from the last day of the month in which he last performs labor or furnishes material, and in no event later than 90 days from the time such building, structure, or railroad is completed, or the work thereon otherwise terminated. Va. Code § 43-4. The memorandum is then filed in the clerk’s office in the county or city in which the building, structure or railroad, or any part thereof is located. Id. The memorandum must show: (1) the name of the owner of the property sought to be charged, (2) the claimant of the lien, (3) the amount and consideration of his claim, (4) the time or times when the claim is or will be due and payable, (5) a sworn statement by the claimant or his agent, declaring his intention to claim the lien, and (6) a brief description of the property on which he claims a lien. Id. In addition, it contains the claimant’s license or certificate number issued by the Board for Contractors, if any, and the date such license or certificate was issued as well as the date such license or certificate expires. Id.
A general contractor lien claimant must submit a certification of mailing of a copy of the memorandum of lien to the property owner, at the owner’s last known address, when recording the memorandum of lien. Id. The verification must be completed and signed while in the presence of a licensed notary.
By a Subcontractor
A subcontractor follows the same general requirements for a lien by a general contractor to perfect a lien. In addition, the subcontractor must also give notice in writing to the owner of the property or his agent of the amount and character of his claim. Va. Code § 43-7. The subcontractor’s lien may not exceed the amount that the owner is indebted to the general contractor at the time the notice is given. Id. The subcontractor’s form is similar to the form for a general contractor, but includes additional entries for the general contractor’s and property owner’s names.
By a Sub-subcontractor
Sub-subcontractors (and sub-sub-subcontractors and so on) may also claim a lien. The same provisions for general and subcontractors apply as far as timelines and what must be included in the claim. However, in addition, the sub-sub must give notice in writing to the owner of the property, or his agent, and to the general contractor, or his agent, of the amount and character of his claim. Va. Code § 43-9. The lien amount may not exceed the amount for which such subcontractor could himself claim a lien. Id.
Virginia Lien Waivers
Lien waivers are quid-pro-quo arrangements between contractors and owners. The purpose of such a waiver is to induce payment from an owner in return for the contractor waiving any future mechanic’s lien rights.
In Virginia, any right to file or enforce any mechanics’ lien may be waived in whole or in part at any time by any person entitled to such lien, except that a subcontractor, lower-tier subcontractor, or material supplier may not waive or diminish his lien rights in a contract in advance of furnishing any labor, services, or materials. Va. Code § 43-3(C). A provision that waives or diminishes a subcontractor’s, lower-tier subcontractor’s, or material supplier’s lien rights in a contract executed prior to providing any labor, services, or materials is null and void. Id.
The Virginia legislature does not mandate a required form of a lien waiver, so common law principles of contract allow for the parties to use any form that clearly spells out their intentions. Note that it is a felony for any person to knowingly present a waiver form to an owner, his agent, contractor, lender, or title company for the purpose of obtaining funds or title insurance if the person forges or signs the form without authority. Va. Code. § 43-13.1.
Waivers fall under two broad categories of either “conditional” and “unconditional.” Each comes with benefits and risks, so take care to use the correct form for the situation. A conditional waiver depends on the actual receipt of payment, so use a conditional waiver when a party pays with a check but the claimant doubts whether it might clear. Therefore, if the check doesn’t clear the bank, it is still possible to claim a lien down the line. This type of waiver offers greater protection to the contractor.
An unconditional waiver works in the opposite fashion. The unconditional waiver is effective when presented to the owner or other party, regardless if the check is valid. If you unconditionally waive a lien, you can still sue on a breach of contract or other legal theory, but that is no substitute for the protections and ease of a mechanic’s lien in recovering any money owed. An unconditional waiver gives an owner more protection while taking away some rights from the contractor.
Within the categories discussed above, there are two subcategories of waivers for a “partial” or “final” payment. A partial payment waiver is used when a partial or progress payment is made. This waiver protects the owner to the amount he or she has made as a partial payment. Think of it as a receipt that shows the owner has at least paid up to that amount. A final waiver, on the other hand, is used when the final or full payment has been made.
When waivers are used properly, they can facilitate the flow of business and encourage prompt payment without any unnecessary holdups. If the correct waivers are used, waivers are advantageous for both a contractor and owner.
In conclusion, a mechanic’s lien is a powerful tool when used properly. By keeping track of key dates and parties in each construction job, contractors can protect their rights.
This article is provided for informational purposes only and should not be relied upon as a substitute for the advice of an attorney. Please contact an attorney with any questions about filing a Virginia Memorandum for a Mechanic’s Lien.